• 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

• EUR/GBP rises to 0.8530 as hotter than expected EZ inflation data buoys euro

• 0.8530 is highest level since May 24 (0.8531 was high that day)

• Prices in the euro zone services sector up 4.1% YY, vs 3.7% previously

• ECB is still expected to cut interest rates next week (June 6)

• But the data is a blow for doves advocating two more ECB rate cuts in H2

• 0.8484 was 21-month low for EUR/GBP earlier this week nL8N3HV5NW

• EUR/USD drop to 2-week 1.0789 Thurs, found support at daily cloud top/200dma

• Recovery stalled at 200-hourly ma 1.0845. Matched Fri after EZ HICP beat f-c

• 21-dma crossed above 200-100-dma this week which is typically bullish

• Key Resistance 28-16 May highs 1.0889/95 - not above since March

• Month-end flows can weigh USD through key U.S. PCE inflation data 12.30 GMT

• Multi billion option strikes expire within 1.08-1.0900 range Friday

• Hedge flows related to options have been shackling EUR/USD for weeks

For more click on FXBUZ

• Cable drops to threaten 1.2700 before US April core PCE data at 1230 GMT

• 0.3% MM; 2.8% YY f/c. Support points below 1.2700 include 1.2675 and 1.2650

• USD could strengthen if core PCE hotter than expected - or weaken if cooler

• 1.2747 was Thursday high, after downward revisions to US Q1 data hurt dollar

• Trump becomes first US president convicted of a crime nL1N3HX34H

• Biden allows Ukraine limited use of US arms to strike inside Russia

• Trades down 0.1% at the base of a 1.2716-1.2735 range with the USD up 0.1%

• UK business optimism hits eight-year high, hiring plans strengthen - Lloyds

• No tier-one UK data in London - European and US inflation lead event risk

• 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 stained break of the rising 1.2649 21-day moving average would be bearish

• This 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

• AUD/USD unchanged in Asia after trading in a 0.6641-0.66275 range

• Rally attempts thwarted by weak China data which dampens sentiment

• China's factory activity unexpectedly dips as property pain persists

• But AUD dip buyers lurk as higher-for-longer RBA rate expectations support

• Second recovery from strong support at 0.6580-90 hints of double-bottom

• Focus shifts to U.S. PCE price index Fri, key for Fed rate expectations

• Support 0.6610-15, 0.6580-90, resistance 0.6650, 0.6675-80

• For more click on FXBUZ

• Off 0.15% near the base of a 1.0811-1.0835 range with the U.S. dollar +0.1%

• Last-minute month-end rebalancing flows could produce interesting moves

• EZ and US inflation lead event risk today, which could be pivotal

• Charts - momentum studies crest/fall, as 21-day Bollinger bands contract

• 5, 10, & 21-day moving averages coil - signals show no little bias

• Thursday's 1.0788 early European low is the initial support

• This week's 1.0889 high is the first significant resistance

• 1.0795/00 653 mln and 1.0825 669 mln are the close strikes for May 31

  For more click on FXBUZ

Synopsis:

ING forecasts that a rate cut by the European Central Bank (ECB) in the upcoming June meeting is almost certain, citing recent indications from ECB officials and current economic data. The focus now shifts to the nature and future implications of this expected rate reduction.

Key Points:

1. Inevitable Rate Cut: Recent economic data, including inflation and sentiment indicators, are unlikely to deter the ECB from implementing a rate cut next week, fulfilling the widely anticipated move suggested by multiple ECB communications.
2. Nature of the Cut: The upcoming decision is seen as a critical point to determine whether this cut is a singular adjustment or the beginning of a more extended easing cycle. The ECB’s approach will heavily depend on inflation trends and economic conditions aligning closer to the 2% target.
3. ECB's Communication Strategy: Post-cut, the ECB is expected to adopt a cautious communication approach during the press conference, likely avoiding any definitive forward guidance to maintain flexibility in policy direction.

Conclusion:

While a rate cut by the ECB next week is deemed certain by ING, the broader implications and future monetary policy path remain open. The ECB is likely to frame the cut as a necessary adjustment while keeping its options open for responding to future economic developments.

• AUD/USD unchanged in Asia as weak China data thwarts recovery attempt

• Unexpected contraction in China's May factory activity weighs

• Downside limited as soft US data Thu keeps hopes of Fed rate cut alive

• Supported by higher-for-longer RBA rate expectations

• Second recovery from strong support at 0.6580-90 hints of double-bottom

• Focus shifts to U.S. PCE price index Fri, key for Fed rate expectations

• Support 0.6610-15, 0.6580-90, resistance 0.6650, 0.6675-80

• For more click on FXBUZ

• Flat early after closing up 0.25% with USD off 0.35% after soft U.S. data

• UK business optimism hits eight-year high - Lloyds Bank Business Barometer

• Hiring plans are the strongest since 2017 - confident into the election

• Charts; daily momentum studies crest - 5, 10 & 21 DMAs edge higher

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

• A stained break of the rising 1.2649 21-day moving average would be bearish

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

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

For more click on FXBUZ

• Steady after closing up 0.25% with the USD off 0.35% as data disappointed

• Yield spreads tightened, 10yr bund -3bp 2.655%, 10yr UST -7bp 4.554%

• EZ and US inflation leads event risk tonight - suggests a tight Asian range

• June ECB rate cut priced in - optimism on inflation and further cuts builds

• Charts - momentum studies crest/fall, as 21-day Bollinger bands contract

• 5, 10, & 21-day moving averages coil - signals show no real bias

• Thursday's 1.0788 early low in Europe is initial support

• This week's 1.0889 is the first significant resistance

• 1.0825 669 mln and 1.0845/50 1.311 BLN are the close strikes for May 31

  For more click on FXBUZ

• AUD/USD opens 0.35% higher after trading in a 0.6591-0.66475 range Thursday

• Bounces from strong support at 0.6580-90 as a double-bottom forms

• Boosted by soft U.S. economic data which keeps hopes of a Fed rate cut alive

• Lower U.S. yields, higher-for-longer RBA rate expectations underpin Aussie

• 1st RBA rate cut not seen until July or Aug next year as AU inflation sticky

• Softer commodities may cap AUD gains; copper -11% from record high in May

• Iron ore slips after China reiterates steel output control

• China NBS PMIs and U.S. PCE price index key for direction Friday

• Support 0.6610-15, 0.6580-90, resistance 0.6650, 0.6675-80

• For more click on FXBUZ

Synopsis:

HSBC outlines its bullish stance on the Swiss Franc (CHF), triggered by recent comments from SNB Governor Jordan that highlight potential shifts in the central bank's approach to monetary policy and currency management. These remarks have significantly influenced the CHF's position in the market.

Key Points:

1. Inflation Concerns: SNB Governor Jordan pointed to the weak CHF as a primary driver of rising inflation in Switzerland. His readiness to counter this trend by potentially selling foreign exchange reserves signals a strategic pivot that could support the CHF.
2. Neutral Rate Adjustments: Jordan's suggestion that the neutral interest rate might rise over the coming years implies a less aggressive path towards rate cuts compared to other G10 countries. This scenario supports a stronger CHF as it suggests a tighter monetary policy stance relative to peers.

Conclusion:

HSBC's bullish view on the CHF is based on the SNB's shifting approach to handling inflation and currency strength. With domestic inflation remaining sticky and fewer rate cuts anticipated due to a potentially higher neutral rate, the SNB's new stance against a weak CHF could further bolster the currency. Investors should watch for further indications from SNB policy actions and comments to gauge ongoing impacts on the CHF's trajectory.

• GBP$ firm into NY close, +0.33% at 1.2743; Thurs range 1.2747-1.2681

• Weak U.S. Q1 GDP 2nd est, PCE data sinks yields across the curve

• Traders curate positions pre-U.S. core PCE price IDX, EZ HICP Friday

• Sterling gain after US GDP tempered ahead of Friday's PCE price data

• IRPR shows BoE cut odds 48% in June, 100% in Nov; Fed 56% odds for Sept

• GBP$ res at 1.2772 Wed high, 1.2803 Mar 21 high, 1.2822 upper 30-d Bolli

• Supt 1.2714 30-HMA, 1.2680 Thursday low, 1.2634 100-DMA