• NY opened near 1.0870 after 1.08745 traded on EBS overnight, slide extended

• Pair fell despite US yield US2YT=RR slip, equity ESv1 & goldXAU= gains

• 1.0843 traded, bounce above 1.0860 ensued but pair slid again

• US$ buys weighed; USD/CNH traded above 7.2480 while stocks, gold turned down

• EUR/USD sat near 1.0850, traded down -0.05% late in the session

• Pair still consolidating gains off the May 9 low which is a bull signal

• Rising monthly RSI, hold above many daily MAs reinforce bullish signals

• Minutes of Fed's April 30-May 1 meeting are a key risk Wednesday

• Fed's Goolsbee speaks Wednesday, may impact risk sentiment

• For more click on FXBUZ

Synopsis:

Credit Agricole anticipates a stubbornly neutral stance from the Reserve Bank of New Zealand (RBNZ) in its upcoming May meeting, despite market expectations for impending rate cuts.

Key Points:

• Market Expectations vs. RBNZ Outlook: Markets are pricing nearly two 25bp rate cuts by the end of the year, with the first expected by October. However, RBNZ may disappoint these expectations, potentially boosting the NZD.
• Economic Backdrop: New Zealand has entered a double-dip recession in H2 2023, and recent indicators suggest another soft growth patch. Employment growth has slowed, and unemployment has risen to a nearly three-year high at 4.3%.
• Inflation Concerns: Despite a slowdown, headline inflation remains high at 4% YoY, above RBNZ's 1-3% target range. The bank's preferred inflation measure is also elevated at 4.3% YoY.
• Inflation Expectations: Sectoral factor model inflation expectations have fallen but remain slightly above the mid-point of the target range.

Conclusion:

Credit Agricole expects the RBNZ to hold the Official Cash Rate (OCR) at 5.50% and project a cautiously optimistic tone about the effectiveness of current policy settings. Governor Adrian Orr is likely to emphasize the necessity of maintaining the OCR at the current level for a "sustained period" and suggest that rate cuts are not imminent, possibly not starting until H1 2025.

USD/JPY traded flat in another session of consolidation on Tuesday, with low volatility keeping long carry popular and maintaining an upward bias for the dollar against the yen.

While there have been modest attempts by USD/JPY to drift higher to test the May 14 high at 156.80, a dip in U.S. yields has acted as a drag on the pair.

Closely watched Federal Reserve official Christopher Waller reiterated that several more months of good inflation data will be needed before being comfortable to support easing.

Though cautious, the comments had a limited impact on Fed pricing, which continues to hold around pre-U.S.
CPI levels at 42bps, down from last week’s peak of 52bps 0#FEDWATCH.

All told, the Fed’s patience is another factor that will keep risk appetite underpinned and by extension the path of least resistance remains on the upside for USD/JPY.

For more click on FXBUZ

Synopsis:

Société Générale assesses the technical patterns of AUD/USD, indicating a potential rise towards 0.6750 and possibly up to 0.6900.

Key Points:

• Support Level: AUD/USD has found support at a trend line that has been in place since October 2022, located near 0.6360.
• Recovery and Breakout: The currency pair has rebounded, moving past the 50-day moving average and breaking above the neckline of an Inverse Head and Shoulders pattern.
• Potential Upside: This technical configuration suggests a potential upward trajectory towards initial targets of 0.6750, followed by 0.6870 to 0.6900 if the momentum continues.

Conclusion:

The technical analysis by Société Générale highlights a promising setup for AUD/USD, projecting an upward movement based on recent support and pattern formations. The potential targets of 0.6750 and 0.6900 offer key levels for traders to watch as the currency pair attempts to capitalize on this bullish pattern.

EUR/USD traded near flat Tuesday as investors shrugged off euro zone pricing data that could push the ECB in a more dovish direction, indicating that expectations of Fed rate cuts could be playing a larger role in the market.

German April producer prices came in at +0.2% versus +0.3% estimates for month-on-month and -3.3% versus estimates of -3.1% for year-on-year.

The report weighed down German yields DE2YT=RR as the data reinforced bets the ECB will cut in June.

The dollar's yield advantage over the euro increased due to German-U.S.
spreads US2DE2=RR widening slightly.

EUR/USD's buoyancy may be attributed to investors still expecting the Fed to cut rates despite rhetoric warning that caution may be warranted before deciding on the first reduction.

U.S.
short-term rates markets still have nearly 50bps of cuts priced in for 2024 with easing expected to continue through early 2026.

EUR/USD remained within the May 16-17 daily ranges however, which is an indication that the pair's consolidation of gains off the May 9 daily low is intact.
Consolidation is a bullish tech signal and the phase could resolve with a resumption of the rally off April's low.

Unless U.S. data clearly indicates rising inflation and the Fed signals they're more concerned price pressures are heating up, dollar bears may emerge and EUR/USD may rally.

For more click on FXBUZ

Synopsis:

CIBC views the latest Canadian CPI data as a green light for the Bank of Canada (BoC) to initiate rate cuts in its upcoming June meeting, citing continued easing in core inflation metrics.

Key Points:

• Headline CPI Alignment: Today’s CPI figures aligned with consensus at a 0.5% monthly increase, leading to an annual rate of 2.7%, a decrease from the previous 2.9%.
• Core Inflation Softness: Core inflation measures such as CPI-Trim and CPI-Median showed year-over-year decreases to 2.9% and 2.6% respectively, indicating underlying softness in price pressures.
• Monthly Trends and Impacts: The monthly data remained moderate, with CPI excluding food and energy only rising by 0.1% on a seasonally adjusted basis. Mortgage interest costs significantly drove the headline CPI year-over-year increase, while reductions in telephone services and internet costs countered these effects.
• BoC’s Stance: Following the April rate decision, BoC Governor noted the need for persistent subdued inflation readings before considering rate cuts. The trend of tame inflation over the last four months aligns with CIBC's prediction of a rate cut in June.

Conclusion:

The recent CPI data confirms CIBC's expectation for a BoC rate cut next month, marking a pivotal shift in Canadian monetary policy aimed at addressing softening inflation while supporting economic growth.

Synopsis:

Bank of America provides an in-depth analysis of Japan's recent FX interventions, examining various aspects including financing sources, impacts on US rates, and implications for the Bank of Japan's balance sheet, among other key issues.

Key Points:

1. Financing Sources: The Ministry of Finance (MoF) likely financed its April 29 intervention through withdrawal of deposits rather than selling securities, affecting liquidity dynamics.
2. Impact on US Rates: Interventions could lead to decreased demand for US Treasuries (USTs), potentially influencing US interest rates.
3. BoJ Balance Sheet Impacts: The interventions have implications for the Bank of Japan's balance sheet, particularly regarding sterilization efforts to manage liquidity.
4. Communication Strategy: The MoF is strategically increasing uncertainty in the market to temper speculative activities and stabilize the yen.
5. Future Interventions and USD/JPY Outlook: Further interventions are likely if USD/JPY continues to pressure critical levels, influencing the currency pair's trajectory.
6. FX Hedging Strategies: Given the elevated carry and prevailing uncertainties, FX hedging is becoming an attractive option for investors in yen-denominated assets.

Conclusion:

Bank of America highlights the complexity and multi-faceted impacts of Japan's FX interventions on financial markets. These interventions not only affect currency stability but also have broader implications for global financial markets, making a strategic approach to communication and hedging essential for managing associated risks.

• Cable eyes 1.2725 resistance level before BoE's Bailey speaks at 1700 GMT

• 1.2725 was Monday's two-month high. 1.2750 and 1.2800 are obstacles beyond

• Support points include 1.2700. UK CPI data due 0600 GMT Wednesday; 2.1% f/c

• UK grocery price inflation falls to 2.4%, lowest since Oct 2021, says Kantar

• UK CBI manufacturing orders book balance minus 33 vs minus 20 forecast

• IMF warns Britain against more pre-election tax cuts nS8N3D00B2

• Gold rallied after becoming oversold in late April, early may

• Rise from $2277.19 to $2449.89 record high resulted

• Rally then became overbought with gold dipping to $2406.10

• Corrections may be small, toward $2384 - 38.2% Apr-May rise - $173/oz

• Gold is in a steep uptrend with consolidations unfolding at elevated levels

• Demand has outstripped supply and trends are specs' friends

• Record high was 38.2% fibo target drawn from Feb low

• Next targets $2500, $2553, $2724 and $3000 may be achieved this year

• Gold could benefit from a period of risk aversion nL1N3HO0HV

• FX option strike expiries have helped contain EUR/USD in mid 1.08's of late

• Traders selling FX options this week amid lack of data before long w-end hol

• Adds size to existing strikes and related hedge flows to help contain FX

• Another 2.1-billion euros with strikes 1.0840-50 expire Tuesday nL1N3HO0AG

• Wednesday has €1.4-bln 1.0825-35, €771-mln 1.0860, Thurs €1.4-bln 1.0900

• Friday sees biggest collection - a massive €8-billion between 1.0860-1.0900

For more click on FXBUZ

• USD/JPY has seen a 156.03-55 range, on Tuesday, according to EBS data

• Likely stops above 156.80, 157.00, but offers ahead nL1N3HO064

• Long tail on last Thursday's candle highlights a downside rejection

• Huge differential between Fed and BOJ still continues to underpin USD/JPY

• Fin Min Suzuki: Japan closely monitoring weak yen & bond market nL1N3HO016

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

• Euro usually makes gains against the yen in May nL1N3HA131

• Bitcoin has surged $6k in just two sessions reaching $71,957

• April-March rise has spanned $15k - next targets $74,837 and $83,909

• Demand is currently far outstripping supply - bigger rise likely

• Demand for most risky assets is robust which is great for bitcoin

• Rally is currently stretched above $70,882 peak of 20-day Bollingers

• Dips due overbought situation likely to remain shallow toward 68k or 66k

• Bullish cloud break holding and our short is in trouble

• Daily cloud top is falling away sharply, removing support

• However, a bid is holding early Tues, just below the 1.2725 Mon high

• Slight fade in daily bull momentum and RSI is flat lining in o/b territory

• Sterling looks bullish while above 1.2646-50, Frid low and daily cloud top

• We will maintain our 1.2684 short for now

  For more click on FXBUZ

• FX Option strikes expire at 10-am New York/3-pm London - Tuesday May 21

• EUR/USD: 1.0800 (631M), 1.0840-50 (2.1BLN), 1.0860 (320M), 1.0900 (942M)

• USD/CHF: 0.9055 (1.9BLN), 0.9100 (383M). EUR/CHF: 0.9850 (898M)

• GBP/USD: 1.2600 (210M), 1.2625-30 (718M)

• EUR/GBP: 0.8600 (433M), 0.8650 (200M)

• AUD/USD: 0.6565-75 (1.6BLN), 0.6650 (226M), 0.6675 (200M), 0.6705-15 (511M)

• AUD/NZD: 1.0850 (304M). EUR/AUD: 1.6300 (200M)

• USD/CAD: 1.3600 (460M), 1.3640-45 (1.4BLN), 1.3700 (1.3BLN)

• USD/JPY: 154.50 (795M), 156.75 (295M), 157.00 (400M), 157.75 (590M)

• AUD/JPY: 102.75 (330M)

For more click on FXBUZ

• AUD/USD down 0.2% in Asia, takes slightly hawkish RBA minutes in stride

• Australia central bank pondered raising rates on higher inflation risks

• But traders relieved as c.bank says inflation expectations well anchored

• Expectations that next move from RBA will be a rate cut gain ground

• Markets price in a December rate cut probability at 50%, April cut at 85%

• AUD downside limited as RBA rate stance diverges from other major cenbanks

• Elevated commodity prices and carry-trade demand buoy AUD outlook

• Supports 0.6645-50, 0.6620-25, resistance 0.6690-95, 0.6710-15

• Asia range 0.6675-0.66465

• For more click on FXBUZ

Synopsis:

MUFG outlines a momentarily positive environment for G10 commodity currencies influenced by recent economic developments, but maintains a cautious outlook for the longer term.

Key Points:

1. Improved Global Backdrop: The recent soft US CPI report for April has alleviated some of the financial market pressures, supporting a more optimistic view for a global economic soft landing.
2. China's Economic Stimulus: While new measures aimed at boosting China's housing market have been introduced, they were less significant than anticipated, raising questions about the robustness of China's economic recovery.
3. US-China Trade Tensions: The recent US tariff announcements, though limited, underscore ongoing trade tensions, which are expected to intensify as the US approaches its presidential elections later in the year.

Conclusion:

While the current environment offers temporary support to G10 commodity currencies due to softer US inflation data and hopes for global stability, MUFG advises caution. The firm highlights lingering uncertainties, particularly concerning China’s economic momentum and geopolitical factors such as US-China trade relations, which may impact the sustainability of gains in these currencies over the longer term.

• AUD/USD -0.3% despite RBA May minutes revealing c.bank considered rate hike

• Australia central bank pondered raising rates on higher inflation risks

• Decided to stand pat in part to avoid "excessively fine-tuning" policy

• Judged hike might be needed if forecasts on inflation proved too optimistic

• AUD upside capped for now as Fed policymakers cautious on inflation, policy

• Buying dips preferred as multiple factors buoy outlook

• Support 0.6645-50, 0.6620-25, resistance 0.6690-95, 0.6710-15

• Asia range 0.6647-0.6675

• For more click on FXBUZ

• Japanese officials were mostly mum on FX last week with market in stasis

• Last week saw USD/JPY down from 156.80 on May 14 to 153.60 on May 16

• No need for verbal intervention then, USD/JPY since on rebound however

• Break back up on to 156 handle resulting in fresh MOF-speak

• FinMin Suzuki notes concern over negative aspects of a weak yen

• Says MOF will deal appropriately as needed, stable FX desirable

• FinMin-speak not limited to FX, closely watching moves in JGBs too

• Says will conduct "appropriate" bond management policy too

• The BOJ recently cut the size of its 5 to 10-year JGB purchases

• The move to cut was most likely done in coordination with MOF

• See nP8N3GY09K, nP8N3HA031, related nL1N3HO00A

• For more click on FXBUZ

• +0.05% after closing down 0.1% with the U.S. dollar rising 0.15%

• Yield spreads little changed, 10yr bund +2bp 2.532% 10yr UST +1bp 4.437%

• Cautious Fed speakers provide underlying USD support - ECB June cut is live

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

• 21-day Bollinger bands rise - uptrend stalled - remains a positive setup

• Targets 1.0898 break, 0.786% March/April fall, then test 1.0980 March high

• Friday's 1.0836 low, then the 1.0824 rising 10 DMA are initial supports

• 1.0840/50 2.115 BLN and 1.0875 942 mln are the close strikes for May 21

  For more click on FXBUZ

• AUD/USD closes 0.35% lower on Monday after failing to stabilise above 0.6700

• Dips to remain shallow as rally in base and precious metals support

• Iron ore climbs to 3-mth high, gold and LME copper hit record highs

• Higher-for-longer RBA rate stance will limit AUD downside

• Minutes of RBA May meeting due Tuesday, will be key for direction

• Upside thwarted for now as Fed policymakers cautious on inflation, policy

• 0.6640-50 to 0.6750 consolidation will break higher to 0.6838, 2024 high

• Further support at 0.6620, resistance 0.6710-15; Mon range 0.6708-0.6662

• For more click on FXBUZ

Synopsis:

Credit Agricole provides an analysis on why the Euro's recent outperformance may not signal a broader, sustained rally. Despite anticipation of ECB monetary easing, several factors could limit the Euro's gains in the near term.

Key Points:

1. Delayed Impact of ECB Easing: The beneficial effects on growth from expected ECB rate cuts may not be immediate, particularly if the lower rates are not quickly passed on to borrowers.
2. Global Trade Risks: Any recovery in the Eurozone remains susceptible to potential disruptions in global trade, exacerbated by ongoing geopolitical tensions and the upcoming US presidential election.
3. Inflation Concerns: Persistent high commodity prices may lead to renewed cost-push inflation, which could diminish real incomes within the Eurozone, undermining economic stability.
4. Competitive Devaluation Risks: The possibility of depreciation in Asian currencies as a form of competitive devaluation could cap gains in the Euro, maintaining pressure on the currency.

Conclusion:

While there are optimistic views regarding the Euro's performance following potential ECB policy easing, Credit Agricole outlines several challenges that may restrict the scope for significant Euro rallies in the near term. These factors include delayed transmission of monetary easing, geopolitical and trade uncertainties, inflationary pressures, and currency devaluation strategies by other economies.

USD index rose 0.06% by New York afternoon trade, helped by a slight rise in long-end U.S. Treasury yields that facilitated a widening in U.S.-Japan rate differentials, which contributed to a rally in USD/JPY back above 156.

The dollar was trading close to sideways against the EUR and GBP as traders await UK CPI and Fed minutes from the April 30-May 1 meeting on Wednesday.

A bevy of Fed speakers attracted the most attention, including Fed Vice Chair Philip Jefferson, Vice Chair Michael Barr for supervision and Atlanta Fed President Raphael Bostic, who uniformly indicated the fight against U.S. inflation is ongoing amid the current restrictive policy.

Though the comments were tipped slightly less dovish, the bulk of the comments were old news and held little sway over FX direction.

EUR/USD was trading -0.02% at 1.0865.
With the ECB expected to cut rates in June, further gains may be hard to come by unless the Fed shifts to a more dovish policy.

Currently LSEG’s IRPR page indicates the ECB is expected to cut in June and with a total of 66bp on the way in 2024 -- far more dovish than the Fed, which markets see inaugurating an easing cycle in September and delivering a scant 40bp reduction by year-end.

USD/JPY was trading at 156.16.
Technically, a close above 156 is likely to stir further bullish tones.
With Fed members keeping to a steady rate tack in the near-term, and the BoJ not likely to begin hiking soon, wider U.S.-Japan rate differential is likely to keep USD/JPY bid, barring further yen intervention talk.

GBP/USD rallied to a 2-month high at 1.2726.
The pound's rise was likely due to more short covering ahead of Wednesday’s UK CPI release.

Sterling bulls were paying no heed to higher UST yields or the underlying dovish tone by the BoE, put in after the recent dovish hold by the MPC.
A further move lower in UK inflation may increase betting on a June rate cut as well as a second rate reduction in August.
A resurgence in dovish expectations would undermine the current bullish GBP tone and put April lows at 1.2299 and Oct 2023 lows at 1.2070 in sharper focus.

For more click on FXBUZ

• USD/JPY ending NorAm +0.28% at 156.08; Monday range 156.23-155.50

• Fed wary of persistent inflation, will allow tight policy more time

• UST yields flat in front of curve, +2bp on long-end lifts USD

• USD/JPY bulls assert control after clearing 156 nL1N3HN1H9

• Fed minutes Wednesday key event, though Fed speakers beat steady policy drum

• Barring talk of more-hawkish BoJ rates U.S> rate advantage USD positive

• $JPY supt 155.50 Mon low, 155.45 21-DMA, 155.06 38.2% Fib of 160.25-151.86

• Res 156.23 Mon high, 156.55 daily high May 15, 157.04 61.8% of 160.25-151.86

• Japan manufacturers want stable FX from BOJ policy, survey shows nP8N3G700Q

For more click on FXBUZ

• NY opened near 0.6690 after 0.67085 traded overnight, pair fell early on

• US$ bought on the back of US yield US2YT=RR gains; USD/CNH hit 7.2466

• Commodities gave up overnight gains and traded lower; stocks softened

• Remarks from Fed's Jefferson, Barr on inflation helped weigh on AUD/USD

• AUD/USD fell to 0.6662 but bounced, sat near 0.6680 late in the day

• Gold XAU=, copper HGv1 turned positive & stocks ESv1 were buoyed

• AUD/USD traded down -0.25% but technicals still leaned bullish

• Pair still consolidating gains from the rally off the May 8 low

• Rising monthly RSIs, hold above the 10-DMA reinforce bullish signals

• A slew of Fed speakers are due Tuesday which may impact risk sentiment

• For more click on FXBUZ