EUR/USD, EUR/JPY flows - Holiday thinned, still consolidating with mkt short euros
Holiday thinned start to the week, energy looking to US-Russia deals
Euro confirmed as very short and continues to consolidate around the 1.2 area
A thin start to the week with Japan out for Sports Day, US out for Columbus Day and little on the schedule in-between.
Main focal point from the weekend is the ongoing US efforts to push energy prices down into the midterms with Trump following up the Russia diesel deal with a declared Russia-Ukraine energy ceasefire – although that was news to Zelensky, who has yet to see the details. While Houthi attacks in Saudi remain a concern, Nymex is off around $1 and diesel is off around $3 ½.
EUR/USD meanwhile continues to base out around the 1.2 area, extending the consolidation of the last week. IMM data shows spec euro shorts at the largest since 2020, tending to reinforce the message of the market being somewhat oversold and the spec trade well populated. Whether that translates into any immediate profit-taking/squeeze potential really depends on a trigger.
The next week weeks could see considerable volatility as euro fiscal concerns on one side run into the uncertain impact of the US midterms, where Trump continues to heavily hint that he has plans in place to disrupt the elections and results if, as is increasingly suggested by the polling, he sees heavy losses in the midterms – the ironically named Russ Vought apparently having 'big surprises' in store.