Synopsis:

Credit Agricole has noted significant shifts in G10 foreign exchange positions, with the New Zealand Dollar (NZD) becoming the most overbought currency, surpassing the US Dollar (USD), which now sees selling interest. Meanwhile, the Canadian Dollar (CAD) remains the largest short in the G10, despite some new buying interest.

Key Points:

1. NZD's Rise to Popularity: The NZD has emerged as the most popular long position among G10 currencies, experiencing inflows predominantly driven by IMM flows, along with contributions from banks, hedge funds, and real money investors. Corporate outflows, however, are also noted.
2. USD Experiences Outflows: The USD saw selling interest last week, primarily driven by IMM flows. While banks and hedge funds contributed to inflows, significant outflows came from corporates and real money investors.
3. CAD Remains Most Shorted: Despite a surge in buying interest influenced by Credit Agricole CIB flows, CAD continues as the largest short position within the G10. This position is supported by inflows from banks, corporates, hedge funds, and real money investors.

Conclusion:

These recent movements in G10 currency positions reflect changing market dynamics, with NZD gaining favor, USD facing pressure, and CAD maintaining its status as the most shorted currency. These trends offer insights into investor sentiment and market positioning in the foreign exchange domain.

Synopsis:

Barclays anticipates the European Central Bank (ECB) to initiate a rate cutting cycle starting this week, with subsequent reductions dependent on economic data. This expected monetary policy divergence with the U.S. Federal Reserve is seen driving the EUR/USD lower in the coming months.

Key Points:

1. ECB Rate Cut Imminent: The ECB is poised to cut rates by 25 basis points this Thursday, marking the beginning of a series of reductions anticipated throughout the year.
2. Projected ECB Rate Cuts: Consistent with Barclays' economists' forecasts, three rate cuts are expected in 2024 (June, September, December), reflecting a cautious and data-dependent approach by the ECB.
3. Policy Divergence with the Fed: Currently, the market has priced in a modest policy divergence between the ECB and the Fed for 2024, with no differences expected by the end of 2025. This outlook may need adjustment given global economic conditions.
4. Impact of External Factors: Subpar economic indicators from China and persistent geopolitical tensions, alongside the upcoming U.S. election, are likely to pressure EUR/USD further.
5. EUR/USD Forecast: Barclays projects the EUR/USD to trend towards 1.05-1.06 over the coming months.

Conclusion:

Given the anticipated ECB rate cuts and the economic and geopolitical challenges globally, Barclays maintains a bearish outlook on the EUR/USD, expecting it to move towards their forecast range.

• AUD/USD hit 0.6665 in Asia, then traded down to 0.6633 in Europe's morning

• Drop aided by falls in iron-ore DCIOc2, gold XAU= and AUD/JPY

• NY opened near 0.6650, pair traded close to flat as consolidation persists

• US yield US2YT=RR, USD/CNH drops & equity ESv1 gains helped pair bounce

• Consolidation, hold above 10- & 21-DMAs give AUD/USD techs a bullish lean

• US May ISM manufacturing PMI, April construction spending are data risks

• May ISM services PMI, weekly claims, May payrolls risks loom later this week

• For more click on FXBUZ

• AUD/USD drop to 0.6633 (intra-day low) influenced by lower iron ore prices

• Iron ore is Australia's biggest export earner. 0.6665 was Asian session high

• 0.6628-0.6672 was Friday's range. 0.6591 was Thursday's two-week low

• Australia minimum wage to rise by 3.75% to A$24.10 per hour from July 1

• US May ISM manufacturing index due at 1400 GMT; 49.6 f/c vs 49.2 in April

• Australia orders Chinese investors to sell down stake in rare earths miner

• EUR gained last week but a long upper shadow Frid hurt the bullish outlook

• Our long remains in play but progress is elusive

• The 1.0890/00 area continues to be resistance

• Daily-monthly RSIs are rising and the pair trades above the 10 and 21-DMAs

• A June 19 1.0789-72 cloud twist could begin to drag on the EUR

• Conflicting signals but we continue to target 1.0960

  For more click on FXBUZ

• Cable falls to 1.2709 as USD benefits from hawkish steer from Fed's Kashkari

• Kashkari says U.S. rates should stay on hold for 'extended' time - FT

• 1.2709 is intra-day low (1.2701 = Friday low). 1.2755 was Asian session high

• Friday's high was 1.2765, following US data - including Chicago PMI miss

• CFTC data showed net GBP long jumped after hotter than expected UK CPI data

• After trial, investors weigh Trump 2.0 factor as election looms nL1N3HY1RY

EUR/USD has been tied to the confines of a relatively tight 1.0789-1.0895 range for three weeks, and without a renewed catalyst, FX option trading is only making it harder to escape this range.

FX options thrive on spot volatility/expectations, so its absence favours selling options to bank premium.
Increased option sales are adding to the amount of strikes already within this now familiar range.
To avoid exposure to currency direction, option dealers will offset their strike risk with cash.
That cash hedging will typically increase as the expiry draws near and keep the spot rate close to the larger strikes, adding to congestion.

When looking at DTCC traded option data charts, the amount of soon-to-expire strikes has been clear to see, and it continues to be greatest in the 1.08-1.0900 zone.
There have been multi-billions of euros expiring over the last couple of weeks and the data shows another 20 billion euros expiring this week.

Implied volatility gauges realised volatility/expectations, so it's no surprise to see and it's trading close to multi-year lows.
Unless impending event risks - such as Thursday's ECB meeting, Friday's U.S. NFP and the June 12 US FOMC policy announcement - can reignite FX volatility and/or a significant directional shift, EUR/USD may continue to struggle to escape the shackles of recent ranges.

For more click on FXBUZ

• Last week's volatility between 1.2801-1.2681 lapses into early Mon weakness

• We remain short from 1.2720 for 1.2540 with a 1.2810 stop

• Sterling is pivoting around the 10-DMA, today at 1.2728

• Daily positive momentum is fading and RSI is turning over

• A late June 1.2561-81 cloud twist showing up on the daily chart

• Twist could pull on sterling through June

  For more click on FXBUZ

• FX option strikes expire at 10-am New York/3-pm London - Monday June 3

• EUR/USD: 1.0805 (1.4BLN), 1.0835-45 (750M), 1.0850 (1BLN)

• 1.0855-60 (1.2BLN), 1.0870 (1.4BLN)

• USD/CHF: 0.9000 (200M), 0.9025 (250M). EUR/CHF: 0.9875 (350M)

• GBP/USD: 1.2725 (229M)

• EUR/SEK: 11.5650 (300M)

• AUD/USD: 0.6625 (540M), 0.6640-50 (318M)

• USD/CAD: 1.3620-30 (426M)

• USD/JPY: 157.00 (931M), 158.00 (861M)

For more click on FXBUZ

• Up 0.05% in a 1.0846-1.0858 range with the U.S. dollar down just 0.1%

• Risk 'on' in Asia - Nikkei +0.95%, AsiaxJP stocks +1.7%, e-mini S&P +0.25%

• EZ and national manufacturing PMIs lead event risk in Europe - forecast 47.4

• Charts - neutral momentum studies, as 21-day Bollinger bands climb

• 5, 10, & 21-day moving averages conflict - signals show no significant bias

• Thursday's 1.0788 low was the base last week and remains initial support

• Last week's 1.0889 high capped Friday - now the first significant resistance

• 1.0855/60 1.174 BLN and 1.0870 1.414 BLN are the close strikes for June 3rd

For more click on FXBUZ

• Flat early after closing up 0.1% with the U.S. dollar off 0.1% on Friday

• Sterling resilient, supported by hopes a Labour win will ease EZ tensions

• A closer relationship with the EZ would certainly help UK business

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

• 21-day Bollinger bands climb - signals continue to show a net positive setup

• A sustained break of the rising 1.2659 21-DMA would be a bearish signal

• Lats week's 1.2801 high and Thursday's 1.2680 low initial support/resistance

• A close above 1.2801 would target a test of the 1.2893 2024 high in March

For more click on FXBUZ

• Up 0.05% early after closing up 0.1% with the U.S. dollar off 0.15%

• S&P cuts France's credit rating to 'AA-' amid rising deficits

• EZ inflation came in above forecasts - ECBWATCH prices a Jun 6 cut at 92.7%

• Charts - momentum studies flat-line, as 21-day Bollinger bands contract

• 5, 10, & 21-day moving averages coil - signals show little significant bias

• Thursday's 1.0788 low was the base last week and is the initial support

• Last week's 1.0889 high capped Friday - first significant resistance

• 1.0855/60 1174 BLN and 1.0870 1414 BLN are the close strikes for June 3rd

  For more click on FXBUZ

• AUD/USD likely to remain bid on dips after closing 0.2% higher Friday

• Boosted by lower U.S. yields after data showed inflation stabilized in April

• Apr PCE price index +0.3, on expectations; May Chicago PMI lowest in 4 years

• Price cuts, weaker spending could bolster Fed's faith in inflation outlook

• Higher-for-longer RBA rate expectations continue to support AUD

• China Caixin manufacturing PMI Mon watched after official PMIs disappoint

• Busy data week for Australia; Q1 GDP, current account, and April trade eyed

• Early in the week, the partials comprising GDP will be released

• Support 0.6625-30, major at 0.6580-90, resistance 0.6675-80, 0.6695-0.6700

• Friday global range 0.66275-0.66725

• For more click on FXBUZ

Repeat with no changes

• USD net G10 long cut again -$3.72bn in May 22-28 period; $IDX -0.02%

• Inflation, relative yields remains the key driver of FX pricing

• EUR$ +0.33% in period, specs +16,097 contracts now long57,572

• EZ inflation, employment data hot, setting up for 1 and done cut in June

• $JPY +0.69%, specs -11,672 contracts now -156,039; wide rate diff $ positive

• GBP$ +0.35%, specs +24,439 contracts now +25,402; less dovish BoE lifts GBP

• $CAD -0.07%, specs +4,239 now -86,585; dovish BoC likely tempers CAD gains

• AUD$ -0.26%, specs +6,317 contracts, now -49,916, RBA not seen cutting until May/Jul 2025

• USD/CNH fell below the 10-DMA, up trend off May 3 low Friday, traded 7.2482

• Buyers emerged there and a rally ensued as risk sentiment soured

• US$ firmed while stocks ESv1 and gold XAU= turned lower on the session

• USD/CNH rallied above the trend line & 10-DMA, traded 7.2684, was up +0.13%

• Daily RSI diverged and the rally kept the up trend off the May 3 low intact

• Monthly RSI is rising and a monthly bull hammer candle is in place for May

• That candle formed after mid point of 15-month Bolli bands was tested

• Technical signals do not bode well for USD/CNH shorts

• For more click on FXBUZ

• GBP$ hovered near flat at 1.2730 in NY afternoon; Friday range 1.2766-1.2701

• Pair rallied to session high after below-f/c m/m core PCE price index data

• Initial dovish lean, lwr UST yields unwound as Fed Sept/Nov cut view intact

• What will it take for sterling to scale new peaks? nL1N3HY1J3

• Traders await data for policy clarity; US/UK PMIs and US payrolls in focus

• Res 1.2766 Friday post-data high, 1.2801 May 28 high, 1.2823 upper 30d Bolli

• Support 1.2718 Fri's post-data low, 1.2700 Friday low, 1.2680 May 30 low

Synopsis:

Danske Bank highlights recent developments that have positively impacted the Swiss Franc (CHF), pointing to strong Swiss GDP growth and comments from SNB President Thomas Jordan as key factors influencing near-term expectations for CHF.

Key Points:

1. Strong Q1 GDP Growth: Switzerland's GDP for Q1 exceeded expectations, growing by 0.5% quarter-over-quarter, supported by robust domestic demand. This growth rate surpassed both the consensus and previous quarter's figures.
2. SNB President's Remarks: In a recent speech, SNB President Thomas Jordan suggested that the neutral interest rate (r*) might be rising, posing a potential upward risk to inflation forecasts. He also noted the SNB's ability to counteract inflation risks due to a weaker CHF by purchasing CHF or selling foreign currency.
3. Inflation and Currency Movements: April's inflation was higher but aligned with SNB's projections, and recent weakening of the CHF in both nominal and real terms could prompt the SNB to adjust its policy.
4. Implications for June SNB Meeting: The combination of strong economic indicators and potential inflation risks lowers the likelihood of a pause in rate adjustments by the SNB in June. However, May inflation data will be crucial in determining the immediate policy direction.

Conclusion:

Given the strengthened economic backdrop and recent dovish signals from the SNB, there is a reduced likelihood of a policy pause in June. The near-term trajectory for EUR/CHF is expected to trend higher before a projected decrease over the next 6 to 12 months. This scenario underscores the lesser significance of whether the SNB pauses in June or resumes rate adjustments later, as market expectations may adjust accordingly.

• $CAD soft into Europe close, -0.27% at 1.3645; Friday range 1.3689-20

• Pair off post-PCE data NorAm low 1.3620, slight m/m miss shrugged off

• Soft CAD GDP tempered CAD rise; STIRs hint at more dovish BoC policy path

• LSEG's IRPR indicates 80% odds for BoC cut in June, -60bp by Dec 11

• $CAD supt 1.3633 daily cloud base, 1.3620 Friday flash low, 1.3575 200-DMA

• Res 1.3663 falling 21-HMA, 1.3689 Friday high, 1.3702 daily cloud top

Synopsis:

Credit Agricole provides an analysis of the potential impact of the upcoming June ECB meeting on EUR/USD, anticipating a test of the euro's resilience due to expected dovish monetary policy adjustments.

Key Points:

1. Expected Rate Cut: The ECB is anticipated to reduce rates by 25 basis points, aligning with market expectations. This move is seen as a response to subsiding inflation and a slow, yet recovering, economic backdrop in the Eurozone.
2. Forward Guidance: The ECB's updated forward guidance may indicate a need for further easing throughout the year, possibly aligning with Credit Agricole’s expectation of three rate cuts in 2023. This could be perceived as more dovish compared to current market rate expectations.
3. Market Reaction: A dovish stance by the ECB might lead to a decrease in the EUR/USD rate spread and push Eurozone real rates and yields further into negative territory, potentially prompting a near-term pullback in EUR/USD.

Conclusion:

The expected dovish shift in ECB policy during the June meeting could challenge the euro's recent stability. If the ECB indicates a stronger dovish bias than anticipated, it could lead to renewed pressure on EUR/USD, affecting its performance in the near term.

EUR/USD rallied above the 10- and 21-DMAs Friday then struck a three-session high after U.S. data indicated inflation may not be running hot and consumer spending is slowing.

April month-on-month core PCE came in at +0.2% versus +0.3% estimates while consumer spending was +0.3% in April from a downwardly revised +0.7% in March.

The data helped drive U.S. Treasury yields US2YT=RRUS10YT=RR downward as investors build in a greater possibility of the Fed initiating rate cuts later this year.

The dollar's yield advantage over the euro decreased as German-U.S.
spreads US2DE2=RR tightened to help buoy EUR/USD.

The data was not enough of a catalyst for EUR/USD to break resistance near 1.0900, however.
For that resistance to break and the rally to extend longs will need help from U.S. May payrolls data next Friday.

Should the data indicate a softening jobs market, the Fed may lean more dovish especially after the PCE report indicated only a modest rise in inflation.

A downbeat jobs report could lead investors to increase the probability for the Fed to cut in September, which the CME's FedWatch Tool indicated as a roughly 55% probability after PCE data. Click here

A sub-par jobs outcome would most likely push U.S. yields lower, dragging down the dollar and potentially lifting EUR/USD towards 1.1050/1.1100.

For more click on FXBUZ

Synopsis: 

Bank of America (BofA) revises its near-term forecast for USD/JPY, predicting a potential peak range adjustment to 160-165, driven primarily by an uptick in outward mergers and acquisitions (M&A) by Japanese firms.

Key Points:

1. Revised Near-Term Forecast: BofA has increased its near-term forecast for USD/JPY from 157 to 161 by the end of September, reflecting recent trends in outward M&A activity by Japanese firms. This revision contrasts with the Bloomberg consensus of 152.
2. Year-End Forecast Maintained: Despite the near-term adjustment, BofA retains its year-end forecast for USD/JPY at 155, aligning somewhat with broader consensus expectations of 149. This outlook hinges on the anticipation of Federal Reserve rate cuts starting in December and a corresponding decline in the 10-year U.S. Treasury yield to 4.25%.
3. Potential for Higher Peaks: While acknowledging that 160 might not serve as a stringent upper limit, BofA suggests that ongoing Japanese capital outflows and the current low volatility environment could push USD/JPY toward 165. However, they believe the Japanese Ministry of Finance (MoF) could credibly defend the yen within this range throughout 2024.
4. Impact of JGB Yields: The report also notes that rising yields on Japanese Government Bonds (JGBs) have not substantially supported the yen due to the persistently low real yield levels.

Conclusion:

BofA's updated forecast reflects a more bullish stance on the USD/JPY, driven by Japanese corporate behavior and broader financial market dynamics. The projection emphasizes the potential for the yen to face downward pressure but also highlights the role of Japanese fiscal authorities in moderating extreme currency volatility.

Synopsis:

ANZ discusses the outlook for the EUR/USD pair leading into the upcoming ECB meeting, expressing a neutral to slightly bullish stance based on the ECB's potential monetary policy direction and recent inflation data in the EU.

Key Points:

1. Disinflationary Trends in the EU: Recent CPI data across the EU shows that disinflationary momentum is stalling, which might limit the ECB's ability to adopt an overly dovish stance at the upcoming June meeting.
2. Anticipated Rate Cut and Forward Guidance: The market has fully priced in an ECB rate cut. However, the real impact on the EUR will likely hinge on the nature of the forward guidance provided during the ECB's post-meeting press conference.
3. Historical EUR Movements Post-ECB Meetings: Past ECB decisions have occasionally led to an initial EUR/USD downturn, but these losses have often been quickly recovered by the end of the trading session. This pattern suggests that any immediate post-meeting declines might be short-lived.

Conclusion:

Given the ECB's likely emphasis on data dependency and the historical resilience of the EUR following rate cuts, ANZ holds a cautiously optimistic view on the EUR/USD pair. While a rate cut is expected, the associated guidance could lend support to the euro, potentially leading to modest gains or stabilization rather than significant declines.

• AUD/USD fell below the 21-DMA, hit 0.66275, buyers emerged & rally ensued

• Pair turned positive despite commodity HGv1DCIOc2, equity ESv1 drops

• US yield US2YT=RRUS10YT=RR rise also did not keep AUD/UD from rallying

• AUD/USD rallied above the 21- & 10-DMAs, hit 0.6656 early NY, was up +0.35%

• The short covering has the pair near the mid point of its recent range

• Techs lean bullish however; daily, monthly RSIs imply upward momentum

• Bull pennant in place on daily charts reinforce the bullish signals

• US April PCE and its potential impact on Fed policy is now in focus

• A downside surprise may sink US yields, dollar & extend AUD/USD's rally

• For more click on FXBUZ

• AUD/USD ascends to test 0.6647 before US April PCE data at 1230 GMT

• 0.6647 was Thursday's high. US core PCE forecast up 0.3% MM, 2.8% YY

• Cooler than expected PCE might weigh on USD; lift AUD/USD towards 0.67

• AUD/USD was last at 0.67 on May 20 (0.6679 was intra-week high Tuesday)

• White House race plunges into uncharted territory as Trump awaits sentencing