• EUR/USD has traded mainly within 1.05-1.10 since start of 2023

• From Sep 2022 until April this year traders continually bet on pair rising

• The 1.5% interest rate gap weighing EUR/USD is expected to widen this year

• One-year forward swap has risen from around 150 points toward 200 points

• Reduced FX risk is likely to encourage sellers who can bank the carry

• Risk appetite in wider fin markets is robust which suits carry trades

• USD/JPY remain weak as a consequence of the 1985 Plaza Accord

• To correct it's long-term drop USD/JPY must reach 183

• The target for a minor correction of 1971-2011 USD/JPY drop is 183.22

• U.S. interest rate is no longer seen falling far nor to be trimmed soon

• The yen's plunge to a record low in April eases monetary policy

• BOJ is still buying huge quantities of bonds - easing policy

• If oil continues to fall it would support yen, but also depress CPI

• Short and caught, our 1.2684 trade stopped at 1.2730

• An early Wed high of 1.2761 followed by a 1.2745 pullback

• Price has removed the 76.4% Fibo of the 1.2893-1.2299 drop, 1.2753

• Sterling now clear above its daily Ichimoku cloud

• Bulls target the 1.2803 high from March 21

• Positive daily momentum extending: RSI nearing 70 and over bought territory

• We are side lined for now

  For more click on FXBUZ

• NZD/USD options were primed for post RBNZ NZD/USD fx volatility and got some

• NZD/USD from early 0.6094 low to 0.6152 post RBNZ, setback to 100-dma 0.6114

• RBNZ hawkish hold (higher for longer rates) should limit NZD setbacks

• Implied volatility drop reflects lower realised volatility risk post RBNZ

• 1-week NZD/USD implied volatility 8.5 to 7.5, 1-month 8.7 to 8.35

• 1-month implied volatility nears lower end of 10.5 - 7.6 2024 range

• Past 1-month realised volatility at 9.0 may limit deeper implied vol loss

For more click on FXBUZ

• Cable rises to 1.2753 after hotter than expected UK April inflation data

• UK CPI up 2.3% YY vs 2.1% forecast. Services CPI up 5.9% vs 5.5% forecast

• 1.2753 is highest level since March 21, and 76.4% Fibo of 1.2893-1.2299

• 1.2709-1.2722 was Asia range (pre-CPI data). 1.2687-1.2727 was Tuesday range

• Above forecast UK CPI is blow for doves advocating BoE rate cut on June 20

• BoE's Bailey assessed money market impact of gilt sales in Tuesday speech

• NZD/USD up 0.45% heading into Europe but off day high of 0.6152

• Likely to remain bid on dips as RBNZ signals higher-for-longer on rates

• RBNZ holds rates at 5.5% but increases OCR path, raises annual CPI forecast

• Sees rates peaking at 5.7% end 2024, compared with 5.6% three months ago

• Governor Orr confirms that MPC had real consideration on raising rates Wed

• NZ yields rise, AUD/NZD down 0.4%; Asia NZD range 0.6093-0.6152

• NZD/USD resistance 0.6170, 61.8% Fibo of Dec-Apr drop; support 0.6090-0.6100

• For more click on FXBUZ

• AUD/USD unchanged in Asia after trading in a 0.6666-0.66855 range

• Rises to day high as NZD/USD rallies on hawkish RBNZ

• Fails to sustain gains as AUD/NZD sellers cap, cross down 0.7%

• AUD's inability to gain despite slew of positives a worrying sign for bulls

• Ignores higher-for-longer RBA, elevated commodities, carry demand

• Rallies capped as Fed officials urge patience on timing of initial rate cut

• Fed April 30-May 1 meeting minutes, Nvidia earnings key Wednesday

• Supports 0.6645-50, 0.6620-25, resistance 0.6690-95, 0.6710-15

• For more click on FXBUZ

Synopsis:

Danske Bank analyzes the implications of recent US data on EUR/USD movements, anticipating a near-term continuation of the currency pair's historically narrow trading range due to persistent inflation concerns and the close watch on upcoming US and EU economic indicators.

Key Points:

• US Data Impact: Recent US CPI data provided a slight relief by breaking the trend of consistent inflation surprises, stabilizing EUR/USD movements.
• Continued Range-Bound Trading: Given the increasing correlation between US and EU front-end rates, EUR/USD is expected to remain within a tight range of 1.06-1.09.
• Upcoming Data Releases: Key data such as the US PCE inflation, ISM, and non-farm payrolls will be critical to watch, likely keeping EUR/USD around the 1.08 level until these releases.
• Central Bank Policies: The Fed is anticipated to start rate cuts in September, with the ECB expected to make a 25bp cut in June, followed by two more cuts within the year.
• Market Pricing: Current market pricing aligns closely with Danske’s forecast, showing expectations of more aggressive ECB cuts compared to the Fed.

Conclusion:

Danske Bank forecasts a continuation of the narrow range trading for EUR/USD in the near term, influenced by US data releases and central bank policy decisions. The bank notes potential risks including a possible earlier Fed rate cut and fewer ECB cuts than anticipated, which could introduce some volatility to the currency pair’s movements.

• NZD/USD rallies 0.85% as RBNZ holds rates at 5.5% but increases OCR path

• RBNZ sees official cash rate at 5.54% in June 2025 vs. previous 5.33%

• Raises annual CPI forecast to 2.6% in June 2025 from previous 2.4%

• Committee discussed possibility of raising ratesthis meeting

• NZD likely to rally further as RBNZ categorically hawkish

• Resistance at 0.6172, 61.8% of December-April decline

• Support 0.6130-40, 0.6100-10; Asia range 0.6093-0.6152

• For more click on FXBUZ

• Steady after closing up 0.05% resilient with the US dollar up 0.05%

• UK pay deals average almost 5% in the crucial April period: Brightmine

• Wages now outstrip inflation but may ease if inflation expectations fall

• Today's UK CPI and PPI will be a major factor for the BoE rate outlook

• Charts; positive daily momentum studies, 5, 10 & 21-day moving averages

• 21-day Bollinger bands rise - a strong positive trending setup

• Targets a test of 1.2766, 0.786% March/April fall then the 1.2893 March high

• A close below 1.2575 21-day moving average low would end the topside bias

For more click on FXBUZ

• +0.05% after closing -0.05% with the U.S. dollar +0.05% in low-key trading

• ECB President Lagarde is "really confident" inflation is under control

• Bundesbank's Nagel believes after the June cut yields should be data-driven

• EUR/USD remains resilient - ECB June cut priced - US rate outlook now key

• Charts - momentum studies conflict, 10, and 21-day moving averages climb

• 21-day Bollinger bands rise - uptrend stalled, but no longer overbought

• 1.0898, 0.786% March/April fall break needed soon to sustain the uptrend

• Friday's 1.0836 low, then the 1.0835 rising 10 DMA are initial supports

• 1.0830 1.015 BLN - 1.0855/60 872mln May 21 strikes may contain in Asia

  For more click on FXBUZ

• AUD/USD opens unchanged after trading in a narrow 0.6679-0.66465 range Tue

• Markets on-hold as RBA, Fed signal higher-for-longer rate stance

• RBA pondered raising rates in May, says inflation expectations well anchored

• Fed officials urge patience on timing of initial rate cut

• AUD downside limited as 25 bps RBA cut is close to fully priced only in Apr

• Elevated commodity prices and carry-trade also demand buoy AUD outlook

• RBNZ rate meeting, Fed Apr 30-May 1 meeting minutes, Nvidia earnings key Wed

• Supports 0.6645-50, 0.6620-25, resistance 0.6690-95, 0.6710-15

• For more click on FXBUZ

Synopsis:

Goldman Sachs discusses the current foreign exchange landscape, highlighting the challenges in advocating for new USD shorts following recent developments with the Fed and CPI data.

Key Points:

• Market Dynamics: Recent data and Federal Reserve actions have blurred the clear divergence in monetary policy that had previously supported a bearish USD outlook.
• Carry Trade Interest: There is a renewed interest in carry trades, indicating a shift in market sentiment towards holding currencies with higher yields.
• Strategists' View: Goldman Sachs strategists see limited potential for further pressing USD shorts, given the current market conditions.
• Trading Position: The current positioning in various currency pairs makes it challenging to recommend initiating new USD shorts.

Conclusion:

In light of recent economic indicators and central bank activities, Goldman Sachs advises caution against establishing new USD short positions. The current environment suggests a more complex and less predictable FX market, with limited opportunities for leveraging USD weaknesses.

USD index held firmer on Tuesday but off early session highs after Fed Governor Christopher Waller reiterated that the next move by the U.S. central bank is unlikely to be a hike.

Wednesday’s Fed minutes will be a key focus but given recent comments by policymakers highlighting persistent inflation but also keeping hikes off the agenda could leave markets in a holding pattern for more U.S. data to provide direction.

Falling Canadian inflation reported on Tuesday may prod the BoC to join the rate-cutting community as early as June.

After the CPI data, LSEG’s IRPR page indicates June cut odds at 56%, with a full cut priced in for July.

Traders will be eying Wednesday’s UK CPI keenly for hints that the BoE may move more dovishly.
IRPR now projects 50% odds for a 25bp BoE rate cut in June.
A soft CPI release could open the way for BoE cuts in June and August.

EUR/USD was down 0.03% at 1.0853, off session highs at 1.0875, though near the May 16 peak at 1.0895 as more-hawkish Fed expectations continue to recede.

Recent upbeat euro zone data has also diminished 2024 ECB rate cut expectations, providing incremental boosts for the EURO.

USD/JPY dipped 0.1% to 156.11 in NorAm afternoon trading.
U.S.-Japan rate differentials are still heavily skewed in the dollar's favor, but the less-hawkish lean by Waller has seen some USD selling, with support building just below 156.

GBP/USD eked out a 0.03% rise to 1.2708.
The pair put in a new two-month high at 1.2727, extending its streak of higher highs and lows despite market expectations of a further drop in UK inflation.

Risks are skewed to the downside if UK inflation slows as forecast.
A surprise to the downside may open up the way to the May 9 low at 1.2446.
Should June cut odds rise significantly, a pullback to the April 22 low at 1.2299 may be on the cards.

Bitcoin held a 0.5% gain at $69.8k, well off the session high at $72k.
BTC continues to follow ethereum higher.
ETH rose 7.1% to $3,742 as traders prepare for an ETF registration that is expected to boost demand for the cryptocurrency further.

For more click on FXBUZ

• GBP$ flat at 1.2705 into NY close, Tuesday range 1.2727-1.2687

• Early NorAm high faded ahead of Wednesday's UK CPI release

• Sterling hovers near trend highs ahead of key UK CPI Wednesday

• UK core and HL CPI f/c lower may increase odds for June BoE cut

• Should odds for June and August cuts increase GBP$ likely gets hit hard

• GBP$ has put in higher high, higher low for 5 straight sessions

• Res 1.2727 Tues high, 1.2734 38.2% Fib of 1.3144-1.2070, 1.2803 Mar 18 high

• NY opened near 1.0870 after 1.08745 traded on EBS overnight, slide extended

• Pair fell despite US yield US2YT=RR slip, equity ESv1 & goldXAU= gains

• 1.0843 traded, bounce above 1.0860 ensued but pair slid again

• US$ buys weighed; USD/CNH traded above 7.2480 while stocks, gold turned down

• EUR/USD sat near 1.0850, traded down -0.05% late in the session

• Pair still consolidating gains off the May 9 low which is a bull signal

• Rising monthly RSI, hold above many daily MAs reinforce bullish signals

• Minutes of Fed's April 30-May 1 meeting are a key risk Wednesday

• Fed's Goolsbee speaks Wednesday, may impact risk sentiment

• For more click on FXBUZ

Synopsis:

Credit Agricole anticipates a stubbornly neutral stance from the Reserve Bank of New Zealand (RBNZ) in its upcoming May meeting, despite market expectations for impending rate cuts.

Key Points:

• Market Expectations vs. RBNZ Outlook: Markets are pricing nearly two 25bp rate cuts by the end of the year, with the first expected by October. However, RBNZ may disappoint these expectations, potentially boosting the NZD.
• Economic Backdrop: New Zealand has entered a double-dip recession in H2 2023, and recent indicators suggest another soft growth patch. Employment growth has slowed, and unemployment has risen to a nearly three-year high at 4.3%.
• Inflation Concerns: Despite a slowdown, headline inflation remains high at 4% YoY, above RBNZ's 1-3% target range. The bank's preferred inflation measure is also elevated at 4.3% YoY.
• Inflation Expectations: Sectoral factor model inflation expectations have fallen but remain slightly above the mid-point of the target range.

Conclusion:

Credit Agricole expects the RBNZ to hold the Official Cash Rate (OCR) at 5.50% and project a cautiously optimistic tone about the effectiveness of current policy settings. Governor Adrian Orr is likely to emphasize the necessity of maintaining the OCR at the current level for a "sustained period" and suggest that rate cuts are not imminent, possibly not starting until H1 2025.

USD/JPY traded flat in another session of consolidation on Tuesday, with low volatility keeping long carry popular and maintaining an upward bias for the dollar against the yen.

While there have been modest attempts by USD/JPY to drift higher to test the May 14 high at 156.80, a dip in U.S. yields has acted as a drag on the pair.

Closely watched Federal Reserve official Christopher Waller reiterated that several more months of good inflation data will be needed before being comfortable to support easing.

Though cautious, the comments had a limited impact on Fed pricing, which continues to hold around pre-U.S.
CPI levels at 42bps, down from last week’s peak of 52bps 0#FEDWATCH.

All told, the Fed’s patience is another factor that will keep risk appetite underpinned and by extension the path of least resistance remains on the upside for USD/JPY.

For more click on FXBUZ

Synopsis:

Société Générale assesses the technical patterns of AUD/USD, indicating a potential rise towards 0.6750 and possibly up to 0.6900.

Key Points:

• Support Level: AUD/USD has found support at a trend line that has been in place since October 2022, located near 0.6360.
• Recovery and Breakout: The currency pair has rebounded, moving past the 50-day moving average and breaking above the neckline of an Inverse Head and Shoulders pattern.
• Potential Upside: This technical configuration suggests a potential upward trajectory towards initial targets of 0.6750, followed by 0.6870 to 0.6900 if the momentum continues.

Conclusion:

The technical analysis by Société Générale highlights a promising setup for AUD/USD, projecting an upward movement based on recent support and pattern formations. The potential targets of 0.6750 and 0.6900 offer key levels for traders to watch as the currency pair attempts to capitalize on this bullish pattern.

EUR/USD traded near flat Tuesday as investors shrugged off euro zone pricing data that could push the ECB in a more dovish direction, indicating that expectations of Fed rate cuts could be playing a larger role in the market.

German April producer prices came in at +0.2% versus +0.3% estimates for month-on-month and -3.3% versus estimates of -3.1% for year-on-year.

The report weighed down German yields DE2YT=RR as the data reinforced bets the ECB will cut in June.

The dollar's yield advantage over the euro increased due to German-U.S.
spreads US2DE2=RR widening slightly.

EUR/USD's buoyancy may be attributed to investors still expecting the Fed to cut rates despite rhetoric warning that caution may be warranted before deciding on the first reduction.

U.S.
short-term rates markets still have nearly 50bps of cuts priced in for 2024 with easing expected to continue through early 2026.

EUR/USD remained within the May 16-17 daily ranges however, which is an indication that the pair's consolidation of gains off the May 9 daily low is intact.
Consolidation is a bullish tech signal and the phase could resolve with a resumption of the rally off April's low.

Unless U.S. data clearly indicates rising inflation and the Fed signals they're more concerned price pressures are heating up, dollar bears may emerge and EUR/USD may rally.

For more click on FXBUZ

Synopsis:

CIBC views the latest Canadian CPI data as a green light for the Bank of Canada (BoC) to initiate rate cuts in its upcoming June meeting, citing continued easing in core inflation metrics.

Key Points:

• Headline CPI Alignment: Today’s CPI figures aligned with consensus at a 0.5% monthly increase, leading to an annual rate of 2.7%, a decrease from the previous 2.9%.
• Core Inflation Softness: Core inflation measures such as CPI-Trim and CPI-Median showed year-over-year decreases to 2.9% and 2.6% respectively, indicating underlying softness in price pressures.
• Monthly Trends and Impacts: The monthly data remained moderate, with CPI excluding food and energy only rising by 0.1% on a seasonally adjusted basis. Mortgage interest costs significantly drove the headline CPI year-over-year increase, while reductions in telephone services and internet costs countered these effects.
• BoC’s Stance: Following the April rate decision, BoC Governor noted the need for persistent subdued inflation readings before considering rate cuts. The trend of tame inflation over the last four months aligns with CIBC's prediction of a rate cut in June.

Conclusion:

The recent CPI data confirms CIBC's expectation for a BoC rate cut next month, marking a pivotal shift in Canadian monetary policy aimed at addressing softening inflation while supporting economic growth.

Synopsis:

Bank of America provides an in-depth analysis of Japan's recent FX interventions, examining various aspects including financing sources, impacts on US rates, and implications for the Bank of Japan's balance sheet, among other key issues.

Key Points:

1. Financing Sources: The Ministry of Finance (MoF) likely financed its April 29 intervention through withdrawal of deposits rather than selling securities, affecting liquidity dynamics.
2. Impact on US Rates: Interventions could lead to decreased demand for US Treasuries (USTs), potentially influencing US interest rates.
3. BoJ Balance Sheet Impacts: The interventions have implications for the Bank of Japan's balance sheet, particularly regarding sterilization efforts to manage liquidity.
4. Communication Strategy: The MoF is strategically increasing uncertainty in the market to temper speculative activities and stabilize the yen.
5. Future Interventions and USD/JPY Outlook: Further interventions are likely if USD/JPY continues to pressure critical levels, influencing the currency pair's trajectory.
6. FX Hedging Strategies: Given the elevated carry and prevailing uncertainties, FX hedging is becoming an attractive option for investors in yen-denominated assets.

Conclusion:

Bank of America highlights the complexity and multi-faceted impacts of Japan's FX interventions on financial markets. These interventions not only affect currency stability but also have broader implications for global financial markets, making a strategic approach to communication and hedging essential for managing associated risks.

• Cable eyes 1.2725 resistance level before BoE's Bailey speaks at 1700 GMT

• 1.2725 was Monday's two-month high. 1.2750 and 1.2800 are obstacles beyond

• Support points include 1.2700. UK CPI data due 0600 GMT Wednesday; 2.1% f/c

• UK grocery price inflation falls to 2.4%, lowest since Oct 2021, says Kantar

• UK CBI manufacturing orders book balance minus 33 vs minus 20 forecast

• IMF warns Britain against more pre-election tax cuts nS8N3D00B2

• Gold rallied after becoming oversold in late April, early may

• Rise from $2277.19 to $2449.89 record high resulted

• Rally then became overbought with gold dipping to $2406.10

• Corrections may be small, toward $2384 - 38.2% Apr-May rise - $173/oz

• Gold is in a steep uptrend with consolidations unfolding at elevated levels

• Demand has outstripped supply and trends are specs' friends

• Record high was 38.2% fibo target drawn from Feb low

• Next targets $2500, $2553, $2724 and $3000 may be achieved this year

• Gold could benefit from a period of risk aversion nL1N3HO0HV