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EUR / USD
GBP / USD
USD / JPY
USD / CAD
AUD / USD
NZD / USD
USD / CHF
AUD / JPY
AUD / NZD
EUR / CHF
EUR / GBP
EUR / JPY
GBP / JPY
By Paul Spirgel  —  May 20 - 12:00 PM

GBP/USD rose on Monday, moving slightly above Friday's two-month high at 1.2711, but bulls appeared reluctant to push further ahead of plentiful Fedspeak this week, as well as key UK CPI data and the minutes of the Fed's April 30-May 1 FOMC meeting on Wednesday.

U.S.
data last week affirmed Fed musings that the next move will be to ease, lowering U.S. Treasury yields and the dollar.
However, rate cut expectations for September and the full year have receded slightly, helping to steady the U.S. currency.

The pullback in rate-cut expectations may be related to risk management ahead of UK CPI and the Fed minutes.

While most developed market central banks are currently engaging in a follow-the-Fed strategy, that could change depending on upcoming data.

If UK inflation continues its deceleration, as Reuters consensus forecasts predict, prospects for a June BoE rate cut as well as an August move would rise, sapping GBP/USD of its recent vigor and putting 10-DMA support at 1.2596 and the May 9 flash low at 1.2446 in sharper focus.

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By eFXdata  —  May 20 - 10:45 AM

Synopsis:

Bank of America (BofA) discusses the dynamics of G10 foreign exchange as a passive investment strategy amid the current climate of low volatility. The commentary reflects on the early promise of significant currency movements against the USD, which has transitioned into a period of market stagnation with minimal currency fluctuations.

Key Points:

  • Initial Currency Movements: The year began with notable declines in major currencies against the USD, averaging a 4.2% drop, which initially suggested a volatile year ahead.
  • Current Market Stability: Contrary to earlier movements, the quarter to date has seen virtually no change in the average currency value versus the USD, reflecting a period of compressed volatility and market fatigue.
  • Influence of Geo-political Events: Temporary spikes in volatility due to geo-political events have subsided, returning the USD to its prior levels and contributing to the current low volatility.
  • Carry as Dominant Theme: Despite the low volatility, BofA highlights that the financial and macroeconomic backdrop supports the idea that carry trades should remain a primary investment strategy in the currency market.
  • Market Convergence: With the market increasingly aligning with BofA's less constructive view on the USD (except against JPY), there's a growing likelihood of the USD weakening if US data continues to underperform, challenging the narrative of US exceptionalism.

Conclusion:

The current environment in the G10 FX market suggests that adopting a passive investment strategy may be prudent due to the prevailing low volatility and the market's convergence towards a more balanced view of the USD relative to other major currencies. Investors might consider focusing on carry trades, taking advantage of the differential interest rates across countries, as the primary strategy during this period of market stability.

Source:
BofA Global Research
By Christopher Romano  —  May 20 - 10:25 AM

EUR/USD traded close to flat Monday and within the May 16-17 daily ranges, helping to reinforce bullish signals as investors await PMI data, which could facilitate a resumption of the recent rally.

EUR/USD is consolidating gains off the May 9 daily low.
Consolidation is a healthy development as it lets daily RSI unwind near overbought conditions.
The phase may resolve with the rally resuming and new up trend highs being set.

EUR/USD's hold above a slew of daily moving averages and the daily cloud as well and May's rising monthly RSI add to the bullish signals.

May PMI reports are now in focus.

Euro Zone HCOB composite PMI is due Wednesday and is estimated at 52.0 versus the prior 51.7.
The composite has been trending upward since October.
An above-estimate result Wednesday could lead investors to reduce the amount of ECB rate cuts currently priced in by futures.

U.S.
S&P Global Composite PMI Thursday is estimated at 51.1 versus the prior 51.3.
The PMI has been trending towards the 50 level, which separates expansion from contraction.
A result closer to 50 Thursday could sink yields and the dollar as the data could give the Fed another reason to lean less hawkish.

In that scenario yield spreads US2DE2=RR may tighten further, which could help propel EUR/USD upward.

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By eFXdata  —  May 20 - 09:30 AM

Synopsis:

ANZ outlines their strategy and reasoning for adopting a short position on EUR/USD, targeting a movement towards 1.07. The analysis focuses on the current supportive technical environment for the USD, and potential risks that could impact the position.

Key Points:

  • USD Rebound Potential: There is a perceived greater likelihood of a USD rebound compared to a significant EUR/USD rally beyond 1.10, given the current technical support levels for the DXY.
  • Market Focus on US Inflation: Market sentiment is currently heavily influenced by US inflation data, suggesting that strong US PMI price gauges could notably sway FX movements more than headline activity data.
  • Technical Analysis: Daily moving averages are currently supporting EUR/USD, although historical trends show that the pair has crossed these averages with relative ease. The Relative Strength Index nearing overbought levels could indicate a potential reversal.
  • Risks to Position: Key risks include the potential for unexpectedly strong EU PMI data coupled with much weaker US PMI outcomes, which could undermine the long USD position and impact the viability of the short EUR/USD strategy.

Conclusion:

While the short EUR/USD position is supported by technical analysis and a focus on US inflation data, significant risks remain, particularly from potential disparities in PMI data between the EU and the US. These factors could challenge the anticipated movement towards 1.07, and traders should remain vigilant to shifts in market sentiment and economic indicators

Source:
ANZ Research/Market Commentary
By eFXdata  —  May 20 - 08:33 AM

Synopsis:

Goldman Sachs assesses the potential influence of the upcoming UK Consumer Price Index (CPI) on the British pound (GBP) ahead of this week's release. They anticipate that the CPI's outcome will help shape Bank of England (BoE) policy expectations but may not significantly sway GBP due to broader market dynamics.

Key Points:

  • Mixed Employment Data: Last week’s UK employment figures were mixed, leaving BoE rate cut expectations largely unchanged.
  • CPI Expectations: This week's CPI report is critical, expected to include effects from annual price adjustments in several categories, often referred to as the 'April Effect.'
  • BoE Projections: Goldman Sachs' economists believe the BoE has adequately factored these potential volatilities into their projections, suggesting readiness for a rate cut as early as June if CPI aligns with their forecasts.
  • GBP Response to CPI: While the CPI data is pivotal for policy, its direct impact on GBP may be moderated by the currency's greater sensitivity to global economic shifts rather than domestic fiscal policy changes.
  • Global Influence: GBP performance is closely tied to global financial conditions, with tendencies to strengthen against USD and EUR amidst easing financial conditions marked by falling yields and rising stock markets.

Conclusion:

Although the upcoming UK CPI report is key for setting domestic monetary policy, its direct influence on GBP might be subdued as the currency reacts more strongly to global financial trends and policy divergences. This dynamic suggests that broader market conditions could play a more critical role in shaping GBP movements around the CPI release.

Source:
Goldman Sachs Research/Market Commentary
By Richard Pace  —  May 20 - 07:10 AM
  • AUD/USD follows the G10 FX lead with falling FX option implied volatility

  • That's consistent with risk appetite and low FX realised volatility outlook

  • Benchmark 1-month implied vol meets demand low 8's - recent range 7.2-10.0

  • 1-month realised vol and fair value measure for implied settles around 8.5

  • Suggests value/break-even if AUD/USD FX repeats past months performance

  • AUD/USD so far unable to clear daily highs from Jan in the low-mid 0.67's

  • Limits demand for options that would benefit from more AUD/USD gains

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Jeremy Boulton  —  May 20 - 05:45 AM
  • Bitcoin reached $67,712 on Friday - 38-day high

  • BTC has risen back above top of daily Ichimoku cloud

  • Bitcoin rose almost $30k following a similar break in February

  • Plenty of room to rise with top of 20-day Bollinger bands at $68,904

  • The robust will to gamble in fin mkts favours BTC nL1N3HN0CH

  • Targets above current $73,803 record high are $74,154, $78,325, $91,826

  • Bigger EUR/USD rise likely to fuel bitcoin's rally

Source:
Refinitiv IFR Research/Market Commentary
By Rob Howard  —  May 20 - 04:40 AM
  • AUD/USD met headwind pre-0.6714 after vaulting 0.6701 (Friday's top) in Asia

  • 0.6714 was 4-month high Thursday (before Aussie jobless rate above-forecast)

  • AUD supported by higher iron ore prices (big export earner for Australia)

  • Minutes from the RBA's May 7 meeting will be published on Tuesday

  • AUD fell after RBA kept neutral stance on May 7 - when hawkish hold expected

  • CFTC data showed net AUD short up 20% to 77,171 contracts in week to May 14

Source:
Refinitiv IFR Research/Market Commentary
By Richard Pace  —  May 20 - 03:40 AM
  • Implied volatility gauges FX realised volatility/expectations - its very low

  • EUR/USD overnight/next day implied vol 6.0 - break-even just 27 USD pips

  • 1-week expiry implied vol eyes March/2024 lows at 4.0 vs 6.5 pre U.S. CPI

  • 1-month implied vol 5.45 - vs 2yr low 4.9 late Mar and a 7.1 peak in mid Apr

  • Past realised volatility can provide a fair value measure - its heavy too

  • 1-week realised is level with implied in mid 4's. 1-month realised just 4.3

  • A lack of impending data and big expiries can influence/contain FX near term

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Martin Miller  —  May 20 - 02:45 AM
  • EUR/USD last week broke and remained above the daily cloud: bullish

  • The daily cloud now spans the 1.0772-1.0800 region

  • Scope is growing for much bigger gains to retest the key 1.0934 Fibo

  • 1.0934 Fibo is a 61.8% retrace of the 1.1139 to 1.0602 (EBS) drop

  • Fourteen-day momentum is positive, reinforcing the overall upside bias

  • Only a daily close back under the Ichimoku cloud would be negative

  • EUR/USD Trader TGM2334. Previous update nL1N3HK0H1

Source:
Refinitiv IFR Research/Market Commentary
By Jeremy Boulton  —  May 20 - 02:30 AM
  • Gold leaps to $2449.89/oz record peak - up $76/bbl in 2 sessions

  • $2448/oz was next target for this year's rally, $2500 new target

  • Speedy ascent suggests demand is far outstripping supply

  • Pullback likely after rise over $2425 peak 20-day Bollingers - overbought

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

  • Targets at $2553, $2724 and $3000 may be achieved this year

Source:
Refinitiv IFR Research/Market Commentary
By Peter Stoneham  —  May 20 - 02:05 AM
  • Our 1.2684 short play in trouble following strong Friday close

  • Close clear above the daily cloud and a positive start Monday

  • Daily cloud starts to fall away from today, gap to the top opening up

  • However, little in the way of strong resistance until 1.2803, Mar. 21 high

  • Risk of a full retracement of the 1.2893 -1.2299 drop

  • The 76.4% Fibo of that move is at 1.2753

  • We will maintain our stop at 1.2730

    For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Andrew M Spencer  —  May 19 - 11:35 PM
  • +0.05% in a tight 1.0865-1.0876 range, with the U.S. dollar unchanged

  • Upbeat sentiment in Asia, with higher regional stocks and commodities

  • Copper hit a fresh record high on China demand hopes - adding to inflation

  • 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 the 1.0980 March high

  • Friday's 1.0836 low, then the 1.0815 rising 10 DMA are initial supports

  • 1.0850/55 1.682BLN, 1.0875 1.209BLN, 1.0890/00 2.2278BLN strikes for May 20

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Krishna K  —  May 19 - 10:25 PM
  • AUD/USD attempts to stabilise above 0.6700 as risk stays buoyant in Asia

  • All 3 major U.S. stock indexes hit records last week, boost sentiment

  • Asia shares touch 2-year top on China plans to boost property, buoy AUD

  • AUD boosted by rally in metals; LME copper @ 26-mth high, gold at record

  • Downside limited as RBA likely to stay higher-for-longer on rates

  • RBA minutes of May meeting Tue and Fed speakers key this week

  • AUD may consolidate in 0.6640-50 to 0.6730-50 range before further rally

  • Resistance 0.6715, 0.6730, support 0.6675-80, 0.6645-50;

  • For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Andrew M Spencer  —  May 19 - 08:25 PM
  • Steady after closing up 0.25% on Friday with the U.S. dollar flat.

  • Sterling was resilient last week GBP/USD +1.4%, and EUR/GBP -0.5%

  • Asking prices for UK homes hit record high, led by the high-end -Rightmove

  • Wednesday's CPI is the key event for BoE expectations and sterling this week

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

  • 21-day Bollinger bands rise - a strong positive trending setup

  • Resistance close at the 1.2709 April high then 1.2766, 0.786% Mar/Apr fall

  • A close below 1.2545 21-day moving average low would end the topside bias

    For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Andrew M Spencer  —  May 19 - 07:50 PM
  • +0.05% after closing unchanged on Friday with the U.S. dollar flat

  • Yield spreads tightened, 10yr bund +7bp 2.513%, 10yr UST +5bp 4.420%

  • Ukraine braces for 'heavy battles', as Russia continues to advance

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

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

  • Targets 1.0898 0.786% of the March/April fall, then the 1.0980 March high

  • Europe's 1.0836 low, then the 1.0815 rising 10 DMA are initial supports

  • 1.0850/55 1.682BLN, 1.0875 1.209BLN, 1.0890/00 2.2278BLN strikes for May 20

    For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Krishna K  —  May 19 - 07:05 PM
  • AUD/USD well supported in Asia after bouncing from 0.6645-50 support on Fri

  • Boosted by surging prices for base and precious metals on China optimism

  • China unveils 'historic' steps to stabilise crisis-hit property sector

  • Copper surges to 26-mth peak, gold +1.5%, silver breaks $30, hits 11-yr high

  • AUD may consolidate in 0.6640-50 to 0.6730-50 range before further rally

  • Downside limited as RBA likely to stay higher-for-longer on rates

  • China LPR rtae fixing Monday and RBA minutes of May meeting Tuesday awaited

  • Friday global range 0.6701-0.6649; buying dips preferred

  • For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By Paul Spirgel  —  May 17 - 04:09 PM

Repeat with no changes

  • USD net spec G10 long -$1.03bn in the May 8-14 IMM period; $IDX -0.37%

  • Dollar soft after Fed removed hike tones after May 1 Fed meet

  • EUR$ +0.59%, specs +12,565 contracts long grows to +17,155

  • $JPY +1.19%, specs +8,740 contracts now -126,182; dovish fed stirs yen buys

  • GBP$ +0.6%, specs +1,738 contracts now -20,075; dovish Fed tones match BoE

  • AUD$ +0.42%, $CAD -0.55%; lower rate expectations boost commod-centric CCYs

  • AUD, CAD specs sellers into USD weakness, add to significant shorts

  • BTC +2.94% in period, specs +606 contract now short 177 contracts

Source:
Refinitiv IFR Research/Market Commentary
By Christopher Romano  —  May 17 - 01:35 PM

Adds line regarding April leading econ index

  • NY opened just above the 1.0836 session low hit on EBS, choppy action early

  • Pair traded heavy overnight on the back of rising US yields US2YT=RR

  • Dollar bulls couldn't hold gains in NY however as US$ selling emerged

  • Downbeat US April leading econ indexhelped send the dollar downward

  • Rallies on gold XAU=, crypto currencies contributed to US$ weakness

  • Tighter German-US 2-yr yield spreads US2DE2=RR helped EUR/USD lift

  • Pair turned positive, traded 1.08785, was up +0.06% late in the session

  • Daily bulls hammer and rising RSIs may be concerns for EUR/USD shorts

  • For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By eFXdata  —  May 17 - 01:30 PM

Synopsis:

MUFG examines the trend of China's persistent selling of US Treasury bonds, highlighted by the recent release of the US Treasury International Capital data for March, which confirms a continued reduction in China's holdings of US securities.

Key Points:

  • March Data Overview: The data shows overall solid buying of US securities, but notable for China’s sale of USD 9.8 billion in US Treasury bonds and USD 5.1 billion in Agency bonds.
  • Continued Trend: This marks the fifth consecutive month of Treasury bond sales by China, a trend not directly tied to USD/CNY policy moves but rather indicative of a possible saturation in China’s appetite for US Agency bonds.
  • Historical Context: The sustained selling pattern is significant, potentially leading to unprecedented market conditions. Previously, even during the Global Financial Crisis (GFC), such a consistent reduction in both Treasury and Agency bonds was not observed.
  • Market Implications: Ongoing sales could signal a strategic shift by China, possibly moving away from US securities altogether, which would demand close market attention given its potential impact.

Conclusion:

The sustained selling of US Treasury bonds by China raises important questions about future investment patterns and market dynamics. While not immediately alarming, another month of such activity could lead to significant market discussions and potential shifts in global financial strategies.

Source:
MUFG Research/Market Commentary
By Paul Spirgel  —  May 17 - 11:35 AM
  • $CAD drifts lower in NorAm trading, -0.11% at 1.3605; Friday range 1.3644-02

  • UST front-end soft, soft US leading index stirs USD selling

  • Leading IDX hardly tier 1 data but hints US econ slowing may pull cuts fwd

  • Commods higher, oil +0.4%, copper +3% aids commod-centric CAD gain

  • Upcoming CA CPI in focus for clues at near-term BoC policy path

  • $CAD supt 1.3590 May 15 low, daily cloud base 1.3577, 200-DMA 1.3568

  • Res 55-DMa at 1.3622, Friday high 1.3644, falling 10-DMA 1.3661

Source:
Refinitiv IFR Research/Market Commentary
By eFXdata  —  May 17 - 10:45 AM

Synopsis:

Bank of America analysts discuss the trajectory of the USD/JPY exchange rate, emphasizing the potential for the rate to test higher levels again without continuous Japanese yen intervention.

Key Points:

  • Recent Price Action: USD/JPY has risen again, currently trading above the previously critical level of 155 but below the intervention thresholds of 158 and 160.
  • Market Testing: The market is expected to continue challenging the Bank of Japan's (BoJ) tolerance for a weaker yen, particularly around the 158 to 160 levels.
  • Lack of US Cooperation: US Treasury Secretary Yellen's recent remarks do not indicate support for intervention, and the US is seen as unlikely to assist actively in stabilizing the yen.
  • Data Dependence: The trajectory of USD/JPY is also tied to US economic indicators. Significant weakening in US data could deter further bullish testing of the yen.

Conclusion:

BofA warns that without ongoing intervention, USD/JPY could potentially retest the 160 level. Market dynamics and upcoming US economic data will be critical in determining the direction of this currency pair.

Source:
BofA Global Research
By Paul Spirgel  —  May 17 - 10:10 AM

GBP/USD hovered near flat in Friday trading, capped near Thursday's 1.27 high, as traders cogitate over recent softer U.S. CPI and hot import prices while preparing for key UK inflation data next Wednesday that could decide whether the BoE pivots to a lower policy path in June, presenting a challenge for sterling.

Sterling held most of Wednesday's U.S. CPI-related gains, which had lifted GBP/USD to its 5-week high at 1.27, though traders are wary of testing the April 9-10 peak at 1.2709 after the hot U.S. import price data tempered disinflation euphoria.

Adding to resistance for GBP/USD were this week's dovish comments by MPC member Megan Greene, which added to perceptions of a shift toward softer BoE policy following its recent policy vote.

Inflation data that supports such a shift could send GBP/USD to test minor support at the 100-DMA by 1.2632 and the 55-DMA at 1.2603 on its way down Wednesday's long candle to 1.2585 and perhaps the May 14 low at 1.2510.

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary
By eFXdata  —  May 17 - 09:30 AM

Synopsis:

Credit Agricole discusses the outlook for the British Pound (GBP) against the US Dollar (USD) with the upcoming week's busy UK economic calendar, which includes May PMIs, April CPI, and retail sales data. Additionally, speeches by key Bank of England (BoE) officials will be closely monitored.

Key Points:

  • Economic Data: A packed schedule with May PMIs and key indicators such as April CPI and retail sales, which could provide deeper insights into the UK's economic health.
  • BoE Influences: Speeches by BoE Governor Andrew Bailey and other officials like Sarah Breeden and Huw Pill could impact market expectations regarding monetary policy.
  • Impact of Data on Monetary Policy: The April CPI data will be particularly scrutinized; a significantly higher-than-expected inflation rate could prompt a reassessment of the BoE's current easing trajectory and influence GBP valuation.

Conclusion:

GBP/USD movements in the coming week will likely hinge on signs of sustained improvement in the UK's economic recovery. A halt in the repricing of BoE rate cuts could bolster the pound, particularly if the economic data exceeds expectations. However, only a substantial deviation in CPI from forecasts is expected to meaningfully alter the current monetary policy outlook and, by extension, affect GBP trading dynamics.

Source:
Crédit Agricole Research/Market Commentary
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