Synopsis:

ANZ assesses the Japanese Yen (JPY) against the US Dollar (USD), emphasizing the impact of a weaker USD and improved global risk sentiment on JPY. Despite domestic economic challenges, there are signs of emerging price pressures in Japan.

Key Points:

• Economic Overview: Japan's Q1 GDP shows a contraction of 0.5% q/q, reflecting ongoing struggles in private consumption and business activity. March saw a 1.2% y/y decline in household spending.
• Price Dynamics: The private consumption deflator increased to 3.7% y/y in Q1, indicating potential re-emergence of service-related price pressures.
• Future Economic Indicators: Upcoming PMI data, especially service sector price gauges, are crucial and may show strengthening price pressures.
• Monetary Policy Context: These data will help gauge the potential for economic recovery in Q2 and the likelihood of the Bank of Japan moving towards normalization of monetary policy.
• Market Positioning: ANZ notes that USD/JPY movements below 152 may be premature, anticipating a more appropriate trading range of 152–157 given the current economic conditions.

Conclusion:

ANZ maintains a cautious but slightly optimistic outlook for the JPY in the near term, influenced by potential marginal weakening in US yields and the USD. The suggested USD/JPY trading range reflects current economic and financial dynamics.

• AUD/USD hit 0.66835 then turned lower, 0.6649 traded, NY opened near 0.6655

• US yield US10YT=RR, US2YT=RR gains drove broad based US$ buying

• USD/CNH rallied to 7.2349 on D3 in early NY to help weigh on AUD/USD

• AUD/USD sank despite rallies in iron-ore DCIOc2 and copper HGv1

• Pair is testing old resistance near 0.6650 which may now be support

• Daily techs lean bearish; RSI falling, price drop follows Thurs. doji

• Fed's Waller, Daly scheduled to speak Friday, may impact risk sentiment

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• Bearish close Thursday and weakness in early Europe Friday

• Still set for a fifth straight weekly gain

• Close above the weekly cloud could be significant: top at 1.0801

• Subdued risk appetite lending the USD support

• ECB's Isabel Schnabel calls for caution towards rate cuts beyond June

• Germany's econ grew more than expected in Q1 and inv moral at a 2-year high

• Cooling U.S. inflation and a softer econ raised the prospect of rate cuts

• Option sellers/hedgers help define EUR/USD range by 1.0850 nL1N3HK0J3

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• EUR/CHF +0.15%, YTD peak breached, highest since Apr 2023

• Daily close above 0.9848 to provide foundations for further upside momentum

• While a low vol backdrop/sparse macro calendar points to a grind higher

• The path of least resistance remains skewed to the topside

• Support: 0.9800-05 (100-HMA), 0.9783-87 (200-HMA/May 16 low)

• As previously noted, there is a lack of notable resistance until parity

• ECB's Schnabel backs June cut, flags that a July cut is not warranted

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• EUR/USD on Wednesday broke and remained above the daily cloud: bullish

• The daily cloud now spans the 1.0778-1.0801 region

• Scope is growing for much bigger gains to retest the key 1.0934 Fibo

• 1.0934 Fibo is a 61.8% retrace of the 1.1139 to 1.0602 (EBS) drop

• Fourteen-day momentum is positive, reinforcing the overall upside bias

• Only a daily close back under the cloud would be negative

• FX traders can insure against bigger EUR/USD gains nL1N3HJ0SB

• EUR/USD Trader TGM2334. Previous update nL1N3HJ0I1

• Cable respects 1.2700 resistance level as it consolidates gains from 1.2446

• 1.2700 was 5-week high Thursday. 1.2446 was May 9 low after dovish BoE hold

• 31 of 71 economists polled by Reuters expect first BoE rate cut on June 20

• GBP/USD support points include 1.2645 (Thursday's low), 1.2625 and 1.2600

• 1.2709 (double-day high, April 9/10) and 1.2750 are obstacles beyond 1.2700

• BoE MPC hawk Mann is due to speak at 0800 GMT. Fed remains cautious on cuts

Removes strikes not close to current spot FX

• FX option strike expiries Friday May 17

• EUR/USD: 1.0820-25 (1.2BLN), 1.0850 (3BLN), 1.0875 (1.2BLN), 1.0915 (1.1BLN)

• USD/CHF: 0.9050 (375M), 0.9060 (300M)

• GBP/USD: 1.2640-50 (354M)

• AUD/USD: 0.6650-60 (1.3BLN), 0.6680 (318M). NZD/USD: 0.6085-95 (427M)

• USD/CAD: 1.3600 (508M), 1.3640-50 (509M)

• USD/JPY: 155.00 (2BLN), 155.50 (891M), 156.00 (790M)

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• Sterling peaked at 1.2700 Thursday and closed at 1.2668

• Price contained by a falling daily cloud, the top today at 1.2660

• Daily momentum readings are positive but fading and RSI falling

• Support at the daily cloud base and 100DMA, 1.2632 and 1.2614, respectively

• We are short from 1.2684 for 1.2530 with a 1.2730 stop

• Friday close below 1.2632 sees stop lowered

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• AUD/USD down 0.2% as mixed China data, rethink on rate expectations weigh

• China April industrial output beats expectations but retail sales misses

• Property investment data soft, house pxs fall at fastest pace in over 9 yrs

• RBA rate cut expectations rise as Australia's labor market slows gradually

• Futures imply a 44% chance of Dec 25 bps rate cut, 67% chance of a Feb cut

• USD broadly bid Friday as Fed officials also signal caution on policy

• AUD may consolidate in a 0.6640-50 to 0.6730 after rallying 1.7% this week

• Powell speech on Sun at 1930 GMT, China LPR fixing Mon, RBA minutes Tue key

• Resistance 0.6700, 0.6715, 0.6731-51, Jan 24 high & 76.4% of Dec-April drop

• Supports 0.6645-50, 0.6625-30; Asia range 0.66835-0.66585

• For more click on FXBUZ

Synopsis:

TD Securities outlines its strategic perspective on the USD's trajectory, recommending fading the recent rallies of EUR, GBP, CAD, and CHF against the USD due to a divergence in inflation and growth expectations between the US and G10 countries.

Key Points:

• Short-Term Outlook: In the immediate weeks ahead, short-term factors such as positioning and historical fair value (HFFV) indicate potential USD downside.
• Medium-Term Bullishness on USD: Over the next 3-6 months, TD foresees strengthening USD as inflation divergence between the US and G10 becomes more pronounced, despite global growth starting to show signs of convergence.
• Growth and Inflation Dynamics: While global growth revisions are showing convergence, inflation in the US remains distinctively higher compared to G10, suggesting less likelihood of a synchronized monetary policy easing.
• Currency Strategy: TD advises strategically positioning for a stronger USD by fading the recent appreciations in EUR, GBP, CAD, and CHF, which they view as temporary and misaligned with broader economic indicators.

Conclusion:

TD's analysis supports a bullish outlook for the USD in the medium term based on sustained inflation differentials and recommends capitalizing on recent counter-trend moves in other major currencies.

• Off 0.1% at the base of a 1.2653-1.2672 range with the USD up 0.15%

• USD firmed as risk appetite eased in Asia amid mixed Chinese data

• Nikkei -0.35%, AsiaxJP stocks -0.4% and CMCU copper is down 0.4%

• There is no significant UK data, so risk appetite and the USD to lead GBP

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

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

• Resistance starts at the 1.2709 April high then 1.2766, 0.786% Mar/Apr fall

• A close below this week's 1.2510 low would end the topside bias

For more click on FXBUZ

• AUD/USD touch lower in Asia as USD resumes rally versus JPY after Wed drop

• Consolidates as traders rethink RBA and Fed interest rate expectations

• Markets price out RBA hike after softer than expected Australia labour data

• Futures imply a 44% chance of Dec 25 bps rate cut, 67% chance of a Feb cut

• USD broadly higher Friday as Fed officials also signal caution on policy

• China monthly activity eyed for direction; resistance 0.6700, 0.6715

• Supports 0.6645-55, 0.6620-25; Asia range 0.66835-0.66665

• For more click on FXBUZ

• Steady in early Asia after closing down 0.15% with the USD up 0.25%

• Polls suggest an August BoE cut, though June remains a possibility

• BOEWATCH prices June at 13.16 bp chance of a cut, August 24.94 bp

• Upcoming data will be closely watched to gauge rate-cut expectations

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

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

• Resistance starts at the 1.2709 April high then 1.2766, 0.786% Mar/Apr fall

• A close below the 1.2528 21-day moving average would end the topside bias

  For more click on FXBUZ

• Steady after closing down 0.15% with the USD up 0.25% with UST yields

• Yield spreads closed steady with both 10yr bund and 10yr UST yields up 2bp

• ECB's Centeno is confident inflation is easing, no word on a June decision

• Charts - mixed momentum studies, 5, 10, and 21-day moving averages climb

• 21-day Bollinger bands rise - daily charts maintain the positive setup

• Targets 1.0898 0.786% of the March/April fall, then the 1.0980 March high

• New York's 1.0854 low, then the 1.0805 10 DMA are initial supports

• 1.0850 3.058 BLN and 1.0875 1.187 BLN close major strikes for May 16th

For more click on FXBUZ

• AUD/USD closes 0.2% lower Thursday after trading in a 0.6714-0.6655 range

• Likely to consolidate in a 0.6650-0.6730 range after rallying 1.7% this week

• Upside capped as soft labour data prompts a rethink on RBA rate expectations

• Markets price out RBA rate hike, see chance of cut this year

• USD pares Thursday losses as Fed officials also signal caution on policy

• Traders await China monthly activity data Friday for direction

• Resistance 0.6700, 0.6715,0.6731-51, Jan 24th high & 76.4% of Dec-April drop

• Support 0.6645-55, 0.6620-25

• For more click on FXBUZ

Synopsis:

RBC Capital Markets provides insights into their decision to maintain their end-Q2 target for USD/CAD at 1.37, emphasizing the potential impact of upcoming Canadian inflation data and GDP figures, as well as the Bank of Canada's (BoC) monetary policy trajectory.

Key Points:

• BoC Rate Cut Expectations: RBC anticipates a potential rate cut by the BoC in June, contingent on CPI-trim and -median measures averaging below 0.3% month-over-month. If these inflation measures do not align with expectations, the rate cut may be postponed until the BoC's July meeting.
• Market Pricing: The market currently anticipates a reduction of 10 basis points by June and 25 basis points by July. A June rate cut is not fully priced in, suggesting potential headwinds for the Canadian dollar.
• Economic Data: Canadian Q1 GDP data is also due on May 31, but it is expected to have a secondary impact compared to inflation data and BoC decisions.
• USD/CAD Outlook: Despite a general expectation of a potential rate cut, RBC notes asymmetric downside risks to USD/CAD, particularly if U.S. economic data underperforms or Canadian data exceeds expectations.

Conclusion:

RBC reaffirms its end-Q2 target for USD/CAD at 1.37, balancing the possible effects of Canadian economic indicators and central bank actions against broader market conditions.

• USD/JPY rose 0.24% after being down 1.3% earlier on Thur

• Recovery began with weak Japan GDP dimming BoJ rate hike threat

• Prices then helped by surprise surge in US import prices

• That despite big dollar gains in April, 6.3% in USD/JPY

• Thur's 153.60 low was caught by the daily ATR-projected low

• Wed's pre-weak US data dive 155.58 lows are now resistance

• That's also 61.8% of the 156.80-153.60 Tues-Thur slide

• And by the converging 55- & 200-HMAs and hourly cloud base

• Fed speakers sticking to high-for-longer script stabilizes Tsy ylds

• But there isn't much on the US data calendar until late in the month

• Without fuel for Tsy-JGB ylds spread rebound, upside will be tougher

• Carry traders still buying dips, but May's 157.99 high is a stretch

• This week's high came up shy of 61.8% of 160.245-151.86 dive at 157.04

• The longer-term uptrend remains intact while above prior peaks by 152

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• NY opened near 1.0875 after 1.0895 traded on EBS in Asia, drop extended

• Higher then estimated April import prices drove thoughts inflation is rising

• Yields US2YT=RR, US$ rallied & spreads US2DE2=RR widened in US$ favor

• Risk soured; USD/CNH rallied to 7.2270, stocks ESv1 & gold XAU= fell

• EUR/USD fell to 1.08545 the4n bounced as US$ buys abated, risk improved

• Pair neared 1.0870 late, traded down only -0.14% late in the day

• Daily doji formed & daily RSI diverged which may be worries for longs

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• GBP$ ending NorAm -0.1% at 1.2672; Thursday range 1.2701-1.2645

• Pair found resistance at 1.2701's Asia high after Wednesday's soft CPI/RS

• Sterling bulls gassed near 1.2700 nL1N3HJ1MN

• Thursday's higher US imp/exp prices, lower claims hint at stubborn inflation

• May 22's UK CPI in focus for BoE policy clues; BoE's Greene less-hawkish

• Res 1.2701 Thurs high, 1.2709 Apr 9/10 high, 1.2741 38.2% of 1.3144-1.2090

• Support 1.2645 Thurs low, 1.2633 100-DMA, 1.2585 Wednesday's low

Synopsis:

ING provides a cautious perspective on the near-term potential of EUR/USD hitting the 1.10 mark, emphasizing the current market dynamics and economic indicators from the US and the Eurozone. Despite a recent rally, the likelihood of significant further appreciation in the short term is limited due to persistent inflation concerns in the US and policy expectations for the ECB.

Key Points:

• Recent USD Weakness: EUR/USD has experienced a 1% increase this week due to a general decline in the USD. However, the Euro’s performance is relatively subdued compared to other G10 currencies, reflecting its lower correlation with short-term US rate expectations.
• Resistance Levels: While 1.0900 may not pose strong resistance if upcoming US data weakens the dollar further, the threshold of 1.1000 appears premature for the near future.
• Eurozone and ECB Impact: The expected ECB rate cut in June is fully priced in, offering no surprises. Current data from the Eurozone suggests the ECB's future messaging might lean more towards data-dependency rather than additional dovishness.

Conclusion:

Given the mixed economic signals from both the US and Eurozone, ING advises caution regarding EUR/USD’s potential to reach 1.10 soon. The bank highlights the importance of upcoming US economic data and ECB communications, suggesting that significant euro appreciation might be constrained in the immediate term.

• EUR/CHF +0.1%, pressing on pivotal resistance (0.9840-48)

• Closing break above would be increasingly bullish

• Paving the way to parity amid a lack of resistance above 0.9848

• While subdued volatility does not often coincide with breakouts

• A backdrop of low vol, buoyant risk appetite favours EUR/CHF upside

• Carry also benefits EUR/CHF longs when markets are static

For more click on FXBUZ

Synopsis:

Bank of America maintains its prediction for the first rate cut by the Federal Reserve in December 2024, despite a slight softening in the April Consumer Price Index (CPI). The April CPI showed improvements but not enough to significantly shift the Fed's cautious stance on inflation.

Key Points:

• April CPI Details: The headline CPI rose by 0.3% month-over-month, slightly below expectations, with the year-over-year rate decreasing to 3.4%. Core CPI increased by 0.3% month-over-month, resulting in a year-over-year rate of 3.6%.
• Core Goods and Services: Core goods prices fell, led by declines in new and used car prices, while core services, particularly rents, remained high but showed signs of slight moderation.
• Long-term Inflation Outlook: Despite the positive report, inflation levels remain above the Fed's 2% target. The expected core PCE inflation rate is projected at 0.23% month-over-month for April, indicating a gradual decline but still elevated.

Conclusion:

Bank of America concludes that while the April CPI report marks a step in the right direction, it's not substantial enough to alter the Federal Reserve's current approach significantly. Continued high levels of core inflation, particularly in services, support a cautious outlook, leading to the retention of a December timeline for the initial rate cut.

EUR/USD turned lower Thursday after striking a fresh 2-month high as U.S. data indicated stubborn inflation may still influence the Fed to hold rates higher for longer, leaving the euro facing a growing risk of downward correction.

In the slew of U.S. data released Thursday, investors focused on April import prices, which increased by the most in two years -- at +0.9% versus the +0.3% forecast and the downwardly revised March result of +0.4%.

The price increases drove yields US2YT=RRUS10YT=RR upward, which helped increase the dollar's yield advantage over the euro as spreads US2DE2=RR widened after hitting their tightest since early April on Wednesday.

The data increased investors' doubts the Fed will be able to cut the 50bps expected in 2024.

EUR/USD erased nearly half of Wednesday's CPI and retail sales data induced gains, which allowed some short-term bearish tech signals to emerge.

Daily RSI diverged on the new high and a daily inverted hammer candle formed.
Both signals suggest the possibility for a correction in EUR/USD's rally off April's low is growing.

Monthly technical signals still lean bullish, however, which may give longer-term EUR/USD bulls some comfort.

For more click on FXBUZ

Synopsis:

Société Générale highlights the ongoing struggle by Japanese authorities to combat excessive weakness in the yen, despite recent interventions and market fluctuations influenced by US economic data. The commentary underscores the speculative pressure on the JPY and the potential need for continued intervention.

Key Points:

• US CPI Data Reaction: Recent US CPI data has led to volatile and non-trending market conditions, which pose challenges in interpreting short-term data impacts accurately.
• JPY Performance: Among G10 currencies, the yen, along with the Canadian dollar, has underperformed against the US dollar since early April. This underperformance is despite the Bank of Japan's intervention efforts and a recent dip in US yields.
• Market Speculation: The speculative community remains heavily positioned against the JPY, indicating that the recent corrective actions by Japanese authorities have not fully deterred bets on further yen weakness.

Conclusion:

SocGen warns that the fight against the yen's depreciation is far from over, with potential for ongoing volatility and the necessity for additional interventions by the Ministry of Finance and the Bank of Japan. Investors should be cautious, as the environment suggests that despite interventions, significant challenges remain in stabilizing the JPY, particularly if US yields continue to fluctuate widely.