300k and Above – US growth divergence dominates, and US rate hike expectations are pulled forward. USD/JPY retests 110. That puts a lot more pressure on one of Japan’s key trade competitors, the KRW, a currency very well liked and quite well owned globally. The still-richly-valued NZD is sold. Long USD/JPY, Long USD/KRW, Short NZD/USD.
250k to 300K – The path remains clear for USD gains to resume – despite heavy short-term positioning, we see scope for EUR/USD to march lower. Watch the revisions to August payrolls on a print in this range, as the prevailing trend will be key. Short EUR/USD.
150k to 250k – Largely in line with the current trend, but perhaps a modest disappointment to those looking for a clearer bounce back in August NFP. Very little FX reaction likely (depending also on any revisions) and a volatility recompressor. As a result, we like a further decline in one of our top trades, short EUR/MXN, rather than a directional USD play. At the low end of this range a modest clearing of USD long positioning may result, though we wouldn’t expect any large USD moves. The broad range on this bucket reflects the view that we do not anticipate the positive USD theme, and more thematic positioning shifts in USD, to change on a modest miss in either direction.
100k to 150k – Concern about the underlying jobs picture grows – USD weakens on interest rate expectations and positions are squared. We would expect any USD weakness to nevertheless be short lived in this scenario. Long GBP/USD
100k or Below – Risk aversion and position squaring ensue as concerns emerge about slowing growth globally rather than regionally. A softening US picture furthers pressure on an uncertain China outlook. AUD may push to new 2014 lows. Short AUD/