Synopsis:

Goldman Sachs provides insights into the dynamics influencing the USD/JPY currency pair, highlighting the potential for continued upside despite recent interventions by Japan.

Key Points:

• Forex Interventions' Limited Impact: Goldman Sachs notes that Japan's recent interventions in the forex market, primarily funded through cash deposits, have had minimal impact on other asset classes, such as Treasuries, suggesting a limited broader market disruption.
• USD/JPY Upside Potential: The firm believes that the current downward-sloping forwards in the USD/JPY pair will not align with future realizations, indicating potential for further upside.
• Regional Stability and CNY Influence: The interventions are seen as a stabilizing factor for the region, particularly easing pressure on the Chinese Yuan (CNY) trade-weighted index (TWI) in the near term.
• Global Policy Response to a Resilient Dollar: These interventions are part of a broader global response to a resilient U.S. Dollar, contributing to maintaining relatively low FX volatility.

Conclusion:

Goldman Sachs maintains a positive outlook on the potential for further appreciation in the USD/JPY currency pair. The interventions by Japan are viewed as an isolated stabilizing attempt that reinforces a global trend of managing currency fluctuations against a strong U.S. Dollar, suggesting continued investment opportunities in the pair's upside movements.

• 1.2562 is high water-mark for cable since its Ldn am drop to test 1.2530

• Offers expected pre-1.26 if ascent extends: 1.2593 was Monday's high

• BoE rate decision Thursday: Will Ramsden join Dhingra in voting for a cut?

• Markets currently see 46% chance of BoE rate cut in June0#BOEWATCH

• Technical fault delays BoE weekly indexed repo until Wednesday nL8N3HA3ZP

• UK's Labour Party says Tory PM Sunak is out of touch on economy nL1N3HA1AY

Synopsis:

Bank of America discusses the growing importance of hedging against USD appreciation risks for US corporations in 2024, highlighting a significant USD rally and potential disruptive market scenarios.

Key Points:

• USD Strength Impact: Reminiscent of 2022, a more than 3% rally in the USD in 2024 has started to pressure the bottom lines of US corporates, reflecting the impact of a strong home currency on international revenues.
• Market Signals and Forecasts: Short-term quantitative signals suggest that the USD uptrend against G10 currencies remains intact. However, the path to anticipated USD weakness is increasingly uncertain and complex.
• Drivers of USD Rally: The rally has so far been supported by robust US economic performance and attractive yield differentials with G10 peers. Yet, there's a risk that the bullish trend could amplify if triggered by risk-off shocks, further boosting demand for the USD as a safe haven.
• Hedging Recommendations: Given the uncertain outlook and potential for volatility, BofA advises US corporates to consider hedging their exposure to USD appreciation, particularly against the EUR, JPY, CHF, and CAD. This recommendation is based on the current levels of forward premiums and the recent trends in spot currency movements.

Conclusion:

As 2024 progresses, US corporations are advised to be vigilant and proactive in managing currency exposure. Hedging strategies against USD appreciation could safeguard against potential disruptions to financial performance, providing stability in a time of currency volatility and market shifts.

Synopsis:

ANZ presents a nuanced perspective on the Australian Dollar, expressing a cautious stance on AUD/USD due to stronger USD forecasts and mixed domestic signals, while forecasting strength in AUD/NZD based on favorable comparative economic fundamentals.

Key Points:

• AUD/USD Caution: ANZ anticipates a stronger USD in the near term, coupled with ambiguous signals from Australia's economic data, leading to a cautious outlook for AUD/USD.
• AUD/NZD Optimism: The cross reached a year-to-date high on May 2, 2023, and is expected to find support at these levels. Predictions of relative economic strength in Australia compared to New Zealand bolster this outlook.
• Year-End Targets: ANZ projects AUD/NZD to hit 1.11 by the end of the year, driven by a forecasted 5% appreciation of AUD/USD and a more modest 3% increase in NZD/USD.

Conclusion:

While the broader strength of the USD may dampen prospects for AUD/USD, the comparative economic robustness of Australia vis-à-vis New Zealand offers a bullish case for AUD/NZD, making it a potentially favorable position through the end of the year.

• Cable elicits support at 1.2530 after falling from 1.2593 (Monday's high)

• 1.2530 was Friday's low (after jump to 1.2634). More bids expected by 1.2500

• There are 1.2500 option expiries for the 10am ET NY cut today and Wednesday

• BoE event risk Thursday; BofA, SocGen, Danske Bank predict 7-2 MPC hold vote

• UK construction PMI 53.0 vs 50.2 f/c. UK house prices inch up, Halifax says

• CFTC data showed net GBP short rose to 28,990 contracts in week to April 30

• USD/JPY has risen from 153.88 to 154.65, on Tuesday, EBS data shows

• 4th weekly close in a row above long-term 152.60 Fibo bullish nL1N3H92TW

• Huge rate differential between Fed and BOJ continue to underpin spot

• However, Japan warns of action over rapid currency moves nL1N3H9310

• Ueda: Bank of Japan to scrutinise yen moves in guiding policy nL4N3HA2LW

• USD/JPY and EUR/JPY pairs maintain strong 30/60-day positive correlations

• AUD/USD falls to 0.6587 after RBA maintains neutral stance on interest rates

• 0.6649 was Asian session high, pre-RBA, on expectations of a hawkish hold

• Asia high was pip shy of Friday's eight-week peak (scaled on US data misses)

• 0.6587 is lowest level since Friday (0.6587 was also April 29 high)

• CFTC data showed net AUD short fell 13% to 83,235 contracts at end-April

• Australian PM Albanese says China military air incident unacceptable

• Traders are betting $0.9 billion that EUR/USD drops

• Bearish bet is small but traders have bought over $17 billion this year

• The unwinding of a large bullish bet hasn't changed EUR/USD much

• Pair traded 1.0877 EBS low on Jan 5 - now 1.0764

• Daily chart has just recorded a golden cross - 55-DMA rising above 200-DMA

• Bullish techs may couple with rising expectations for U.S. easing cycle

• Spec positions currently represent little restraint any EUR/USD rise

• Potential targets: 1.0825, 1.0886 and 1.1062

• Bearish Monday close but also a long lower candle shadow

• Mixed signals but within a potential bullish continuation pattern

• Daily momentum just holding onto positive values and RSI is rising

• Initial resistance at 0.8587, a 50% Fibo off 0.8643-0.8531

• A close above this retracement level would strengthen the bullish argument

• The 200-day moving average presents a bull target at 0.8607

  For more click on FXBUZ

• USD/JPY has scope for a break above the recent new multi-year 160.24 high

• Medium-term outlook bullish since spot overcame major 152.60 Fibo in April

• Spot has managed to register four weekly closes in a row above 152.60 Fibo

• 152.60 Fibo, a 38.2% retrace of major 277.65 to 75.31 (1982 to 2011) drop

• We remain long at 155.25 for 165.00, meanwhile our stop is just below 150.00

• EUR/JPY 165.73-166.45 EBS range on Tuesday. USD/JPY Trader TGM2336

• AUD/USD -0.4% after RBA holds rates at 4.35%, warns on inflation pressures

• RBA says inflation remains high, falling more gradually than expected

• Assumes rates stay at 4.35% until mid-2025;9 months more than assumed in Feb

• RBA also raises inflation forecast, says outlook remains highly uncertain

• Traders await media conference on monetary policy decision at 0530 GMT

• AUD down from 0.6625 to 0.6597 as c.bank not as hawkish as some had expected

• Buyers surface below 0.6600 as RBA to remain higher-for longer on rates

• AUD dips likely to remain shallow as RBA-Fed rate expectations diverge

• Major resistance 0.6667-77, the high in Mar & 61.8% Fib of Dec-April decline

• Initial resistance at 0.6645-50; supports 0.6595-0.6600, 0.6550

• Asia range 0.6640-0.6597

• For more click on FXBUZ

• Steady in a tight 1.0760-1.0776 Asian range - EUR/JPY climbed 0.4%

• German factory orders and Eurozone retail sales lead the European data

• The Euro remains resilient - ECB cutting before the Fed appears priced in

• Charts - 5, 10, and 21-day moving averages conflict, momentum studies rise

• 21-day Bollinger bands contract - the daily techs show no strong bias

• 1.0817 upper 21-day Bolli and 1.0835, 0.618% of Mar/Apr fall key resistance

• Monday's 1.0750 low and Friday's 1.0724 base in Europe are initial supports

• 1.0750 2.146BLN and 1.0800 1.387BLN are the close strikes for May 7th

For more click on FXBUZ

Synopsis:

Société Générale (SocGen) suggests adopting a strategy of buying EUR/GBP on dips in anticipation of forthcoming central bank decisions, particularly highlighting the upcoming rate decisions from the RBA, Riksbank, and BoE.

Key Insights:

• Central Bank Outlooks: The Reserve Bank of Australia (RBA) is expected to maintain a cautious stance, closely monitoring incoming data. This approach might offer slight support to the AUD but also risks stagnation.

• Bank of England's Conservative Approach: SocGen anticipates the Bank of England (BoE) to hold rates steady for now, considering the current inflation scenario in the UK. The bank forecasts quick rate cuts once the easing cycle begins, though initiation seems delayed as per current MPC sentiments.

• EUR/GBP Trading Strategy: SocGen recommends a 'buy on dips' strategy for EUR/GBP, expecting slower movements but potential upward trends triggered by policy dynamics in the Eurozone and UK.

• Riksbank's Decision Impact: The decision from Sweden's Riksbank could also influence market sentiments, though specific expectations were not detailed in the context.

Conclusion:

As central banks navigate complex economic landscapes, SocGen sees opportunities in currency markets, specifically recommending a cautious but opportunistic approach to trading EUR/GBP.

• AUD/USD gives up gains, trades flat on the day after 2nd rejection at 0.6650

• Pair had failed to break this level on Friday after soft jobs data

• Australian retail sales volumes fell by more than expected in March quarter

• Real retail sales -0.4% in Q1, under market expectations for a fall of 0.2%

• Elevated costs of living, high interest rates deter consumers from spending

• RBA rate decision due; c.bank expected to hold rates, sound more hawkish

• Some expect RBA to revert to tightening bias after turning neutral in Mar

• Flip in one month unlikely as demand concerns mitigate effect of high CPI

• AUD downside limited as RBA-Fed rate expectations diverge

• Resistance 0.6645-50, support 0.6600-05; range in Asia 0.6649-0.6621

• For more click on FXBUZ

• RBA rate decision, Statement on Monetary Policy at 0430 GMT/2.30 PM AEST

• RBA holds media conference on monetary policy decision at 0530 GMT

• Expected to hold rates at 4.35% for 4th straight meeting, sound more hawkish

• Will revise up its near-term inflation forecasts as CPI remains sticky

• Some expect RBA to revert to tightening bias after turning neutral in Mar

• Flip in one month unlikely; Governor Michele Bullock's presser key

• For more click on FXBUZ

• Unchanged after closing up just 0.1% with an inside day on a UK holiday

• Barclays- UK April consumer spending slowed to 1.6%, weakest since Feb 2021

• The British Retail Consortium also reported a sharp drop in retail sales

• BOEWATCH prices no change on Thursday at 90.75% - August 22.67 pt cut priced

• Charts; 5, 10 & 21-day moving averages conflict, 21-day Bolli bands contract

• Mixed daily momentum studies - the daily charts show no strong bias

• Friday's 1.2634 high then 1.2666, 0.618% of the Mar/Apr fall are resistance

• 1.2525 10-day moving average and last week's 1.2467 base are first supports

For more click on FXBUZ

• Steady after closing up just 0.06% after a low-key inside day on Monday

• Yield spreads widened, 10yr bund -4bp 2.476%, 10yr UST -2bp 4.489%

• ECB policymakers grow more confident about cutting interest rates

• Euro remains resilient - ECB cutting before the Fed is priced in

• Charts - 5, 10, and 21-day moving averages conflict, momentum studies rise

• 21-day Bollinger bands contract - the daily techs show mixed signals

• 1.0816 upper 21-day Bolli and 1.0835, 0.618% of Mar/Apr fall key resistance

• Monday's 1.0750 low the Friday's 1.0724 European low are initial supports

• 1.0750 2.146BLN and 1.0800 1.387BLN are the close strikes for May 7th

For more click on FXBUZ

• AUD/USD hovers near 2-mth 0.6650 Fri high as traders await RBA rate decision

• RBA likely to hold rates at 4.35%, sound more hawkish on inflation concerns

• Revival in Fed rate cur expectations on softer US jobs data buoys AUD

• Fed's Williams says next Fed move likely to be lower rates

• Buoyant risk appetite, higher commodity prices provide further boost for AUD

• Resistance 0.6640-50, 0.6665-75, support 0.6595-0.6600, 0.6550-60

• Monday range 0.6638-0.6606

• For more click on FXBUZ

Synopsis:

MUFG predicts potential downside for the GBP in response to the upcoming Bank of England (BoE) policy meeting. They highlight the possibility of a dovish shift indicating closer proximity to rate cuts, prompting them to suggest a long position on EUR/GBP.

Key Insights:

• Dovish BoE Anticipated: MUFG anticipates that the BoE might signal readiness to cut rates sooner than market expectations currently reflect, potentially as early as June rather than the later months of August or September.

• GBP Historical Performance: There's a noted historical pattern of GBP underperformance in May, particularly evident from 2010 to 2020. Although this trend has been inconsistent post-COVID, it underlines potential seasonal weakness.

• Trade Recommendation: Reflecting their bearish stance on GBP, MUFG recommends initiating a long EUR/GBP position as a strategic move to capitalize on potential GBP depreciation.

• Balanced View on GBP Decline: While expecting GBP softness, MUFG believes that improved economic momentum in the UK and favorable conditions for higher-yielding currencies could temper a more significant drop.

Conclusion:

MUFG's analysis suggests cautious positioning regarding GBP leading into the BoE's meeting.

• USD/JPY up 0.6% by 154 after Fri's post-NFP miss 151.86 low

• That low off last Mon's 160.245 peak and suspected MoF interventions

• The drop erased April's breakout beyond 2023/22 peaks by 152

• Made for an attractive dip-buying opp, but dimmed by bearish US data

• Focus now is on the May 15 US CPI and retail sales after hot March readings

• Forecasts for April CPI and sales suggest pullbacks to cooler levels

• But may take much cooler data to put 3 or more Fed cuts by yr-end in market

• At or above-f/c data could test tenkan/50% of last week's dive at 156.05

• All contingent on potential MoF intervention

For more click on FXBUZ

• AUD$ ending NorAm, +0.26% at 0.6628; NorAm range 0.6638-0.6620

• Pair holds near 2-mos high Fri's 0.6650, Mar 8 0.6667

• AUD$ rally off Apr 19 low 0.6363 as Fed rate expectations turn less-hawkish

• Commods a touch higher copper HGc1 +1.27%, oil CLc1 +0.22% aid AUD rise

• Next key data Tues AU ret trade; RBA rate meeting Wednesday, no change exp'd

• Techs are bullish; RSIs rising, pair above slew of daily MAs & daily cloud

• Res 0.6642 upper 30-d Bolli, 0.6650 Friday's 2-mos high, 0.6667 Apr 19 high

• Supt 0.6606 Monday Asia low, 0.6583 100-DMA, 0.6506 50% of 0.6363-0.6650

• Close below 0.6505 shifts momentum back to AUD bears

• For more click on FXBUZ

Synopsis:

Morgan Stanley projects a strengthening U.S. dollar against the euro in the coming quarters, driven primarily by shifting inflation dynamics and central bank policy differences between the U.S. and the Eurozone.

Key Points:

• Inflation Influence: The exchange rate between EUR/USD has historically been sensitive to relative core inflation rates in the U.S. and Eurozone. Fluctuations in these rates since 2020 have notably impacted the currency pair's performance.

• ECB's Rate Cut Strategy: Internal discussions within the European Central Bank are focused on the frequency of rate cuts after an expected initial reduction in June. A market shift towards expecting more aggressive ECB rate cuts could strengthen the USD's position.

• Expected Shifts in Market Pricing: As core inflation rates in the Eurozone decrease, this is likely to alter expectations around central bank policies, potentially favoring the U.S. dollar and exerting downward pressure on EUR/USD.

Conclusion:

Morgan Stanley's analysis suggests a bearish outlook for EUR/USD over the medium term.

• $CAD drifted lower in early NorAm, -0.2% at 1.3658; Monday range 1.3696-48

• Lower Fed rate expectations, US-CA yield convergence provides boost for CAD

• Post dovish Fed hold, IRPR 2024 rate view moved from -22bp to -47bp

• LSEG's IRPR page hints BoC to cut in Jun/Jul, -65bp by Dec meeting

• More aggressive BoC cut view will likely cap outsized CAD gain vs USD

• $CAD supt 1.3648 Mon low, 1.3610 Friday's post-NFP flash low, 55-DMA 1.3601

• Res 1.3696 Monday high, 1.3705 21-DMA, 1.3782/85 May 1/Apr 30 double top

Synopsis:

Credit Agricole advises maintaining long positions in AUD/NZD as it anticipates the cross to approach 1.12, particularly in the context of this week's RBA meeting. They highlight that RBA Governor Michele Bullock is facing a significant test of credibility given current economic indicators.

Key Points:

• RBA's Credibility Test: With inflation above forecasts and unemployment below expectations, Governor Bullock must balance maintaining credibility with cautious policy guidance.

• Neutral Bias Expected: Despite pressures, the RBA is likely to maintain a neutral stance on interest rates, considering softening consumption data and the upcoming impact of mortgage roll-overs at higher rates.

• Bullish on AUD/NZD: Credit Agricole remains bullish on AUD/NZD, citing it as the preferable strategy to capitalize on a strong AUD outlook, despite aggressive market pricing of a potential RBA rate hike by September.

• Global Economic Context: The firm’s outlook considers the robust performance of the US economy and the strength of the USD, which supports their strategy on AUD/NZD.

Conclusion:

Credit Agricole advises staying long on AUD/NZD, anticipating that upcoming developments and economic releases will reinforce a bullish scenario for the Australian dollar, particularly in comparison to the New Zealand dollar.