• Steady in a tight but busy early 1.2349-1.2358 range on D3

• Flash PMIs lead data risk in London - composite poll 52.6, last 52.8

• PMIs across Europe and the U.S. should result in a busy offshore session

• 5, 10 & 21-day and week moving averages fall, 21-day Bollinger bands expand

• Daily and weekly momentum studies slip - charts retain the bearish bias

• Signals target a test of the 1.2224, 0.786% October-March rise

• Monday's 1.2391 top and then Friday's 1.2467 high are initial resistance

• Sterling to track lower as negative factors combine

For more click on FXBUZ

Synopsis:

Société Générale offers a guarded forecast for EUR/USD, USD/JPY, and AUD/USD, highlighting potential for limited movements and the influence of upcoming economic data and market sentiment.

Key Points:

• EUR/USD Outlook: SocGen predicts a potential drop for EUR/USD below 1.05, though falling short of parity. The forecast suggests a lackluster outlook, with the bank hoping for, but not necessarily expecting, market surprises that could influence the pair.

• USD/JPY Dynamics: Recent CFTC data indicates a growing short position on USD/JPY, suggesting that the market is increasingly bearish on the pair. However, SocGen notes that the upside for USD/JPY is limited, and a significant catalyst for reversing this trend appears unlikely in the immediate future.

• AUD/USD and Australian CPI Data: The focus for AUD/USD this week is on the Australian CPI data set to be released on Wednesday. SocGen expects the March CPI to rise slightly from 3.4% to 3.6%, with core inflation anticipated to decrease from 4.2% to 3.7% in Q1. The firm questions whether these figures will be sufficient to adjust the AUD rate curve upward, noting that the Reserve Bank of Australia (RBA) is currently in an extended pause on rate changes. A significant surprise in the data may be necessary to trigger a notable currency reaction.

• Broader Market Sentiment: SocGen also points out that overall risk sentiment will play a crucial role in dictating movements across these major currency pairs. The mood in the market was more positive this morning, but it remains to be seen if this optimism will persist.

Conclusion:

Société Générale’s analysis suggests a week of cautious watching for major currency pairs, with key data releases and broader market sentiment expected to be major drivers. The firm underscores the need for unexpected data outcomes to significantly impact currency valuations, especially for the AUD following upcoming CPI releases. 

• Plenty of Japanese official-speak on FX, BOJ policy, effect limited

• FinMin Suzuki reiterated government ready to act vs excessive moves

• Added government has laid the groundwork to take appropriate action

• Seems USD/JPY move up to 154.85 new 30-year high o/n pushed some buttons

• Comments too from BOJ Gov Ueda in Diet testimony on policy

• He reiterated no preset idea on timing, pace of future rate hikes

• BOJ data-dependent, on inflation outlook, will adjust policy as needed

• Market eyeing possible BOJ move this fall, some say earlier but premature?

• USD/JPY off a tad from 154.84 early high to 154.66

• See nP8N3EL04Q, nP8N3GE008, nL2N3GW022, Ueda-speak nP8N3GE00D

• Related comments nL2N3GW029, nL2N3GQ04H, nL2N3GL04J, nL2N3GE04H

• Also nL2N3GV39F, for more click on FXBUZ

• AUD/USD trying to grind through sell orders around 0.6460 in early Asia

• It is above the 10-day MA (0.6454) for first time since April 10

• Downward momentum has stalled with the 5-day MA now pointing higher

• AUD getting support from rising risk appetite as geopolitical concerns fade nL2N3GV2QW

• Next resistance is at the 21-day MA ay 0.6505 where more selling is tipped

• AUD/USD upside may be limited ahead of inflation data from Australia and US

• Aus Q1 CPI is out on Wednesday, while US PCE price index is out Thursday

• For more click on FXBUZ

• Steady after closing down 0.15% as markets bring forward the first BoE cut

• August BOEWATCH cut fully priced at 28.14bp, up from 22.75 at Friday's close

• Recent dovish BoE comments, expectations of a June ECB cut behind the move

• PMIs in the UK and Europe today suggest a tight GBP trading range in Asia

• 5, 10 & 21-day and week moving averages fall, 21-day Bollinger bands expand

• Daily and weekly momentum studies slip - charts retain the bearish bias

• Signals target a test of the 1.2224, 0.786% October-March rise

• Monday's 1.2391 top and then Friday's 1.2467 high are initial resistance

  For more click on FXBUZ

• Steady after closing down just 0.05% with the U.S. dollar little changed

• ECB governors stick to plan for multiple rate cuts, despite the cautious Fed

• June ECB cut is priced, but the timing of future cuts are data-dependent

• Charts- 10 and 21-day moving averages, plus 21-day Bollinger bands slide

• Daily momentum studies show mixed signals after an inside day - net bearish

• 1.0594, 0.786 of the October-December rise remains the initial support

• The 1.0695 prior 2024 low in February is the initial significant resistance

• 1.0650 1.446 BLN strikes may act as a magnet today in Asia

For more click on FXBUZ

• AUD/USD opens +0.47% after retaining gains made in Asia yesterday

• AUD broadly underpinned by fading geopolitical concerns nL2N3GV2QW

• AUD/USD sellers 0.6455/60 capping gains for time being

• Resistance is at 10-day MA at 0.6453 and break targets 21-day MA at 0.6508

• AUD/USD bids are tipped ahead of 0.6400 with support at Friday's 0.6362 low

• AUD/USD likely to trade in range in Asia with now data to inspire action

• Key will be moves in Asian equities and direction of USD/CNH

• For more click on FXBUZ

Synopsis:

MUFG forecasts a limited upward trajectory for the Canadian dollar (CAD) in the near term, with the USD/CAD pair expected to continue trading in the high 1.30s over the coming months. The bank cites diverging inflation paths between Canada and the U.S. as a key factor influencing this outlook.

Key Points:

• Recent Performance of CAD: The Canadian dollar showed strength last week, performing well alongside the Swiss franc. Despite this, MUFG predicts that these gains are not likely to sustain, anticipating that the USD/CAD will remain in the high 1.30 range.

• Diverging Inflation Trends: A significant driver behind the anticipated movement in USD/CAD is the divergent inflation trajectories in Canada and the U.S. While the U.S. has experienced a series of upside inflation surprises, Canada's core inflation has been surprisingly low in the early months of the year, following persistent highs in the latter half of the previous year.

• Canadian Inflation Dynamics: Canada’s core inflation, which had been stubbornly high, has begun to decrease since the start of the year. The Bank of Canada’s (BoC) preferred measures of core inflation — median and trimmed — slowed to an annual rate of 3.0% in March. This deceleration is more pronounced when looking at the last six months' data, adjusted for seasonality, which shows an annualized rate increase of only 2.5%.

• Monetary Policy Implications: The softening core inflation in Canada is likely to open the door for the BoC to start reducing interest rates, contrasting with the inflation scenario in the U.S., where the Federal Reserve faces ongoing inflation pressures.

Conclusion:

While the Canadian dollar has recently shown some strength, MUFG maintains a cautious outlook, expecting limited gains with potential downward pressure influenced by broader economic factors, particularly inflation and monetary policy divergences with the U.S.

Sterling was again the weakest of the major currencies as markets sees the BoE nearly as likely to cut rates in June as the ECB after a dovish shift in rhetoric, while firm U.S. data keeps Fed easing off the agenda until September or November.

Sterling fell 0.16%, but was well off Monday's 1.2299 low and lowest since Nov.
14, with 2-year Gilts yields falling 9bp and the spread below Treasury yields marginally exceeding 2024's wide.

The limited 1.2300 breach likely enticed some buying ahead of Jonathan Haskel and Huw Pill appearances on Tuesday that will be closely scrutinized after the normally hawkish Bank of England Deputy Governor Dave Ramsden on Friday expressed more confidence that UK inflation risks are receding.

USD/JPY made a new 34-year high and is extremely close to the 155 level many see potentially inducing Japanese verbal or actual FX intervention to cushion the yen's 5.7% drop since early March and nearly 10% slide this year.

An easing of geopolitical derisking that triggered Friday's fleeting dip to 153.49 and the rising 10-day moving average there has given way to another run at heavy 155 optionality.

IMM specs are the most net long USD/JPY since 2007 due to rewarding interest rate differentials and doubts that FX intervention to support the yen would do more than delay further USD/JPY gains.
Even further BoJ rate hikes of perhaps 20bp by year-end might not provide much of a deterrence unless U.S. data and Fed policy become dovish again.

EUR/USD fell 0.04%, remaining in a choppy range above April's 2024 lows at 1.0601.
Prices slid on Monday from 1.0671 highs by the falling 10-DMA and are digesting the more negative Bund-Treasury yield spreads since hot U.S. data forced the expected delay on Fed rate cuts.
Total 2024 Fed cut pricing is at 40bp from over 150bp earlier this year versus the 75bp of cuts expected from the ECB, perhaps starting as soon as June.

Flash April PMIs on Tuesday and German Ifo on Wednesday will be watched ahead of Thursday's U.S. GDP and Friday's BoJ meeting, April Tokyo CPI and U.S. core PCE, with income and consumption eyed if PCE inflation data is as forecast.

Beyond that the focus is on the April U.S. employment report on May 3.

For more click on FXBUZ

• GBP$ pared early NorAm losses, -0.16% at 1.2350; Mon range 1.2392-1.2299

• Dovish Ramsden, Bailey comments, soft UK data stirs UK-US rate divergence

• BoE June cut odds 60%, Fed 20%; BoE -57bp to Dec, Fed -40bp favors USD gains

• Dovish BoE echoes heighten sterling vulnerability nL2N3GV16M

• GBP$ supt 1.2299 Mon low, 1.2287 100-WMA, 1.2272 Nov 14 2023 low

• Res 1.2392 Mon High, 50% of 1.2484-1.2299 dip, 1.2471 falling 10-DMA

• Traders eye UK/US April flash PMIs Tuesday; US core PCE price IDX on Friday

• NY opened near 0.6435 after 0.64555 traded overnight, slide extended early

• US yields US10YT=RR buoyed the US$ & weighed on goldXAU=, copper HGv1

• 0.6425 hit then buyers emerged & yieldsUS2YT=RR sank, stocksESv1 gained

• AUD/USD neared 0.6450 late, traded up +0.45% late in the session

• Daily techs worry shorts; RSI rising, gains follow Friday's long legged doji

• Australia April Judo Bank mfg, services, composite PMIs are risks in Asia

• For more click on FXBUZ

Synopsis:

ING assesses the recent movements of USD/JPY, predicting potential intervention as the pair approaches historically sensitive levels. With broad dollar strength pushing USD/JPY towards 155, intervention risks increase, reminiscent of previous market actions. Meanwhile, ING forecasts further rate hikes by the Bank of Japan, though doubts persist regarding their efficacy in reversing the yen's trend without broader dollar adjustments.

Key Points:

• USD/JPY Movement and Intervention Risk: USD/JPY has recently surpassed 152 and is approaching 155, a level widely regarded as a threshold for potential FX intervention by Japanese authorities. This follows historical precedents where significant interventions occurred, such as the $70 billion sale in September/October 2022 when the rate was around 150.

• Bank of Japan Monetary Policy: ING anticipates that the Bank of Japan (BoJ) may implement two additional rate hikes this year, likely in July and October. Despite these expected adjustments, bringing the policy rate to 0.50% by year-end, the overall downward trend of the JPY may not reverse unless there is a broad depreciation in the dollar.

• Impact of Geopolitical Risks: The yen's position is further complicated by global geopolitical risks, which can lead to mixed outcomes for the currency. While heavy short positioning in the yen might cause abrupt appreciations during periods of broad market deleveraging, higher energy prices, a typical detriment to the yen due to Japan's reliance on energy imports, continue to pose challenges.

• Market Volatility: The movement toward the intervention zone has already triggered an increase in traded volatility, with 1-month levels climbing back above 9%. This underscores the market's sensitivity to both domestic policy shifts and broader international financial dynamics.

Conclusion:

As USD/JPY approaches levels that historically prompt intervention, and with ING forecasting further rate hikes by the BoJ, market participants should brace for potential volatility and intervention actions. The effectiveness of BoJ policy adjustments in altering the yen's trajectory will likely depend on broader trends in the dollar and international risk sentiment.

The USD/JPY uptrend shook off Friday's fleeting flight-to-safety setback and is again focused on testing the 155 level and Japanese authorities' willingness to defend it, with a BoJ meeting, Tokyo CPI and U.S. core PCE at the end of this week key to supporting Treasury-JGB yields spreads and a breakout.

If Friday's April Tokyo CPI and the BoJ meeting's economic projections weaken the case for the two 10bp BoJ rate hikes currently priced in by year-end, an above-forecast March U.S. core PCE could bring the 155 breakout.

Core PCE is forecast up 0.3% month-on-month, with the year-on-year slipping to 2.7% from 2.8%, though the overall rate is expected at 2.6% from 2.5% last and 2.4% in January, much of why the Fed has shied away from rate cuts.

Unless the Japanese and U.S. data are substantially off forecast, a breakout above 155 options defenses could be limited initially, with two major Fibo objectives by 155.20 and other daily and weekly resistance in the mid to upper 155.00s.

Options pricing also shows greater hedging against pullbacks than a big bullish breakout.

Other than data misses this week, BoJ intervention or a slide in Treasury yields on worsening geopolitical risks, the biggest net spec USD/JPY long since 2007 may have to wait for the monthly U.S. employment report next Friday to learn its fate.

For more click on FXBUZ

Synopsis:

TD Securities underscores the significance of the upcoming core PCE data, considering it pivotal for shaping market expectations and movements in 2024. Amid fluctuating market sentiments and diverse economic indicators, this release is anticipated to be a crucial determinant of future monetary policy and currency valuations.

Key Points:

• Significance of Core PCE Data: TD Securities posits that this week’s core PCE print could be one of the year's most crucial data releases, potentially setting the stage for monetary policy direction and market movements for the remainder of the year.

• Market Uncertainty and Sentiment: Recent discussions with clients across Europe reveal a general lack of conviction in current market directions, though there is a consensus that a significant pivot point may be near. This sentiment is mirrored by the market’s mixed reactions to various economic indicators such as growth divergence, risk correlations, and central bank policies.

• Influence on USD and Risk Assets: The core PCE data is particularly critical as it directly influences perceptions of inflation and, consequently, the Fed's rate decisions. A result that aligns with expectations of cooling inflation could support a moderate reversal in USD strength through the third quarter, benefiting risk assets and potentially realigning Fed rate expectations with those of other G10 central banks.

• Implications of an Unexpectedly High Inflation Print: Conversely, a higher-than-expected inflation figure could diminish prospects for Fed rate cuts this year, likely leading to further USD appreciation and adverse impacts on risk assets. This scenario would reinforce the dollar’s strength on the back of persistent inflation and diverging central bank policies.

Conclusion:

The upcoming core PCE print is pivotal in determining short- to medium-term market dynamics and central bank actions. Investors and traders should prepare for potential volatility following this release, as it could significantly influence market sentiment and strategic positioning. The outcome could either affirm a trajectory toward easing monetary conditions or herald continued restrictive policies driven by persistent inflationary pressures.

GBP/USD's latest 2024 low, 1.2305 as of early U.S. trade, is unlikely to be the last as Friday's dovish comments from BoE Deputy Governor Dave Ramsden echo through the market and traders raise the probability of June rate cut near 60%.

Ramsden's confidence that UK inflation risks are ebbing along with BoE Governor Andrew Bailey's recent comments that British inflation is slowing largely as expected have led UK rate traders to pull forward perceived rate cut risks, first from September to August and now June.

This has weighed heavily on GBP/USD, especially occurring as it did as Fed rate-cut expectations have fallen.

LSEG's IRPR now projects 40bp of Fed easing by December, down from more than 150bp at the beginning of 2024.

This divergence will probably leave sterling bears targeting early November 2023 lows near 1.22.
If the dovish rhetoric gains more voices, Oct.
2023 support just below 1.21 could be next.

For more click on FXBUZ

Synopsis:

Credit Agricole forecasts a potential recovery for the British Pound (GBP) this week, contingent on forthcoming economic data and insights from Bank of England (BoE) officials. Key speeches and primary PMIs are expected to provide crucial signals on the economic outlook and monetary policy stance, possibly bolstering GBP strength.

Key Points:

• BoE Speeches: Attention is focused on upcoming speeches by BoE’s Jonathan Haskel and Huw Pill. Investors will be keenly observing for any indications that the Monetary Policy Committee (MPC) is leaning towards a more patient approach regarding rate cuts. Any hint towards delaying rate cuts could strengthen the GBP by aligning expectations with a potentially more stable or improving economic scenario.

• Significant Data Releases: The primary PMIs for April are anticipated with high interest, serving as critical indicators of the current economic climate in the UK. These metrics are especially significant as they may confirm whether the UK economy is moving past the depths of its recent downturn.

• Impact of Risk Sentiment: While positive economic data and reassuring comments from BoE officials could provide some support to the GBP, Credit Agricole notes that an overall improvement in risk sentiment is likely necessary for a more pronounced recovery of the GBP. Factors influencing global risk appetite could include geopolitical developments, international economic data, and market dynamics.

• GBP Outlook: The combination of BoE communications and primary economic indicators will be pivotal in shaping GBP performance in the short term. Positive developments in these areas could lead to a recovery in the GBP, particularly if accompanied by an upswing in global risk sentiment.

Conclusion:

The upcoming week holds significant potential for influencing the direction of the GBP, with key speeches from BoE officials and crucial economic data releases on the horizon. Credit Agricole suggests that while supportive data and dovish tones from the BoE could bolster the GBP, a broader recovery might hinge on shifts in global risk sentiment. 

Synopsis:

Bank of America (BofA) has revised its forecast for the USD/JPY exchange rate upwards, predicting that it will reach higher levels by the end of 2024 and 2025. The adjustment is based on several factors including sustained capital outflows from Japan, an accommodative monetary policy stance by the Bank of Japan (BoJ), and the dynamics of U.S. interest rates.

Key Points:

• Revision of Rate Projections: BofA has increased its forecast for the USD/JPY from 142 to 155 by the end of 2024, with a peak expected in the 155-160 range during the year. For the end of 2025, the forecast has been adjusted from 136 to 147. These revised forecasts are notably higher than current Bloomberg consensus and forward rates.

• Capital Outflows from Japan: There is clear evidence of accelerated capital outflows from Japan, which is a significant driver of the yen's depreciation. These outflows are primarily directed towards the U.S., fueled by differences in return expectations and economic prospects between the two countries.

• BoJ’s Accommodative Policy: The BoJ is likely to maintain an accommodative monetary policy with the policy rate remaining in negative territory. This stance contrasts with the U.S. Federal Reserve's policy trajectory, further influencing the USD/JPY exchange rate.

• Impact of U.S. Rate Cuts on Repatriation Flows: BofA analysts argue that even if the Fed were to cut rates, which would generally support risk assets, it is unlikely to trigger significant repatriation flows back to Japan. This is due to the nature of equity investments driving the outflows, where Japanese investments in U.S. equities are likely to remain in place despite potential rate cuts.

Conclusion: The upward revision in BofA’s USD/JPY forecasts reflects a combination of structural and policy-related factors that are expected to weaken the Japanese yen against the U.S. dollar over the next few years.

• AUD/USD rallied 0.6408-0.64555 overnight, NY opened near 0.6440, up +0.30%

• Rally aided by USD/CNH drop, equity ESv1 & copper HGv1 gains

• US yield US10YT=RR lift & gold XAU= drop helped pair slip from its high

• AUD/USD lift halted near key s-t resistance but daily techs lean bullish

• Daily RSI is rising and a rally followed Friday's long legged doji

• Chicago Fed's national activity index is the sole data point in the US today

• For more click on FXBUZ

• EUR/USD vol shot higher when the pair dipped toward 1.06 last week

• One-month vol has sunk and is back on a 5 handle

• The low level of option vols suggest it's wrong to bet on direction

• Counter-trading moves toward outer limits of ranges seems prudent

• Since start of 2022 pair mainly trading within 1.05-1.10

• Current drop is stretched toward base 20-day Bollinger Bands

• Traders are clinging to a bullish view ahead key level nL2N3GV0A9

• After rising, the dollar may fall nL2N3GV0GB

• EUR/USD continues to consolidate after it failed under 1.0611 Fibo last week

• It failed to close under 1.0611 Fibo on Tuesday, Wednesday and Friday

• 1.0611 Fibo is a 76.4% retrace of the 1.0448-1.1139 (Oct-Dec) EBS rise

• Despite that failure, negative 14-day momentum keeps the bias bearish

• The negative alignment of the tenkan and kijun lines also points to losses

• EUR/USD Trader TGM2334. We are looking to get short at 1.0725

• Speculators take biggest dollar stake since June 2019 nL2N3GU0HK

Changes to offer and stop

• EUR/GBP's dip below the 10-DMA ran into bids Friday

• Rally saw the daily cloud top, 100-DMA and March 26 daily high all breached

• Speed and magnitude of the rally calls for corrective action

• Daily RSI has turned over and the daily cloud is thinning to a twist

• Offer met at 0.8625, ahead of a 61.8% Fibo, for 0.8535 with a 0.8665 stop

• High risk counter bias trade

  For more click on FXBUZ

• Cable holds below 1.24 after pre-weekend drop to 1.2367 on dovish Ramsden

• 1.2367 is lowest level since mid-Nov. 1.2467 was Friday's high (pre-Ramsden)

• Ramsden's view suggests he could join Dhingra in voting for rate cut in May

• There is a large 1.2400 option expiry for the 10am ET NY cut nL2N3GV09V

• CFTC data showed net GBP long shrank to 8,619 contracts in week to April 16

• 8,619 contracts is smallest net GBP long since Dec flip from net GBP short

• Bets on EUR/USD rinsing slashed to just $1.6 bln equivalent

• Smallest wager on a rally since traders turned bullish in Sep 2022

• EUR/USD has sunk from 1.1139 in Dec 28 to 1.0601 EBS in April

• Sell-off paused last week after becoming oversold below base 20-day BBs

• Base 20-Day Bollinger has since fallen to 1.0581 below key fibo at 1.0596

• Fall under 1.0596 would suggest 2023 low at 1.0448 is revisited

• EUR/GBP's dip below the 10-DMA ran into a wall of bids Friday

• Ensuing rally breached the daily cloud top, 100-DMA and March 26 daily high

• Our short's stop was hit at 0.8580

• Speed and magnitude of the rally calls for corrective action

• Daily RSI has turned over and daily cloud is thinning to a May 2 twist

• Signals mixed but we have left an offer by 0.8525, ahead of a 61.8% Fibo

  For more click on FXNBUZ