• NY opened near 1.0705 after 1.0728 traded on EBS in Europe's morning

• Slide extended as yields US2YT=RR, US$ were firm in early trading

• USD/CNH rally above 7.2350, commodity XAU= drops weighed on EUR/USD

• 1.0675 traded but bears ran out of steam, buyers emerged

• Equities added to gains, yields & US$ weakened, EUR/USD neared 1.0715

• Pair traded near flat on the session, daily doji formed, implies indecision

• US April payroll report & its impact on Fed policy is a key risk Friday

• Data indicating softening jobs market could drive a EUR/USD rally

• For more click on FXBUZ

• NY opened with AUD/USD trading lower on the session, opened near 0.6525

• Choppy trading ensued, pair then dipped toward the 0.6516 low from Asia

• US yield US2YT=RR, US$ lifts & USD/CNH lift near 7.2360 weighed on AUD/USD

• Buyers emerged however as yields softened and risk improved

• Equities ESv1 added to gain, gold bounced USD/CNH hit a 1-1/2- month low

• AUD/USD pierced the daily cloud base, traded 0.65605, was up +0.57% late

• Techs lean bullish; RSIs rising & pair above a slew of daily moving averages

• US April payroll report and its impact on Fed policy is a key risk Friday

• A downbeat result may send US yields, US$ down & drive AUD/USD upward

• For more click on FXBUZ

Synopsis:

Credit Agricole discusses the suspected foreign exchange interventions by the Bank of Japan (BoJ), acting on behalf of the Ministry of Finance (MoF), to bolster the Japanese yen (JPY). Recent significant currency moves and BoJ financial data suggest substantial interventions, raising questions about their long-term impact on USD/JPY exchange rates.

Key Points:

• Intervention Evidence: Recent sharp increases in the JPY, coupled with BoJ reports of significant drops in its current account due to fiscal activities, strongly suggest intervention efforts. Estimates suggest around JPY5.5 trillion (approximately USD35 billion) might have been spent this Monday, with similar actions suspected early today.

• Official Confirmation: Japan’s Vice Minister of Finance for International Affairs, Masato Kanda, has opted not to confirm intervention activities, maintaining a strategic ambiguity that leaves markets guessing about future moves.

• Financial Impact: Despite the high cost of these interventions, recent changes in U.S. monetary policy rhetoric and market dynamics may be aligning to support the MoF's strategy. The Fed's recent signals that rate cuts are postponed rather than canceled, alongside falling U.S. Treasury yields and a rally in global equities, have contributed to a more favorable environment for the JPY.

• Model Insights: Preliminary updates to Credit Agricole’s FAST FX model indicate a slight decrease in USD/JPY's short-term fair value, influenced by the shifts in short-term rate differentials between the U.S. and Japan and global equity movements.

Conclusion:

While the MoF's interventions have initially shown limited immediate gains, changing global financial conditions and market reactions to U.S. monetary policy may enhance the effectiveness of these efforts. USD/JPY is currently trading close to its recalculated fair value, suggesting that the MoF's expenditures on interventions might not be in vain. 

• EUR/CHF once again fails to hold above 0.98

• Latest pullback stems from hotter than f/c Swiss CPI (1.4% vs 1.1%)

• However, Swiss CPI is unlikely to move the needle for the SNB nL1N3H50VW

• Muted move in rate-differentials also points to limited CHF rally

• With support at 0.9680-90 putting a floor under EUR/CHF, upside risks remain

• Although, a close above 0.9840-50 is needed to fuel topside momentum

For more click on FXBUZ

Synopsis:

Societe Generale discusses the recent suspected intervention by Japanese authorities in the USD/JPY exchange rate following the Federal Reserve's latest monetary policy decision, noting the limited impact of these actions on reversing the currency's gains.

Key Points:

• Timing and Context: The intervention reportedly occurred amidst key global events, including the Champions’ League semi-final, suggesting a strategic choice of timing to maximize impact.

• Immediate Market Impact: The intervention led to a 3% decrease in the USD/JPY rate, although half of this reduction was quickly recouped. The resilience of the USD/JPY rate post-intervention highlights the ongoing challenges faced by the Bank of Japan (BoJ) in managing the exchange rate amidst differing monetary policy trajectories between the U.S. and Japan.

• Volume of Intervention: While exact figures are awaited, early indications suggest that this week's total intervention may be the most substantial single-week effort by the BoJ to date.

• Yield Differentials and Market Dynamics: The continuing wide yield differentials between the U.S. and Japan are a major force driving the USD/JPY higher, complicating the BoJ's efforts. The yield gap underscores the fundamental economic differences currently influencing the currency pair.

Conclusion:

SocGen expresses skepticism about the immediate effectiveness of the BoJ's intervention strategy, given the significant yield differentials between the U.S. and Japan that continue to apply upward pressure on USD/JPY. The report suggests that without a fundamental shift in either monetary policy direction or economic performance, interventions might only provide temporary relief, with broader economic factors ultimately driving currency value. I

• $CAD soft in early NorAm, -0.2% at 1.3710; Thursday range 1.3737-05

• Post-Fed CAD strength intact; Fed cut odds rise as Powell shrugs off hike

• LSEG's IRPR touts 68% odds for Sept cut, Nov near-100% priced in IRPR

• BoC: There's a limit to how far US and Canada rates can diverge

• BoC's Macklem: Bank could start cutting rates before inflation rate hits 2%

• $CAD supt at 1.3705 Wed/Thur lows, 1.3696 10-DMA, 1.3663 daily base line

• Res 1.3737 Thurs high, 1.3755 upper 21-d Bolli, 1.3847 Apr 16 2024 high caps

 Synopsis:

Bank of America (BofA) projects a possibly hawkish tone at the Reserve Bank of Australia's (RBA) May meeting next Tuesday, which could influence Australian Dollar (AUD) valuations positively amidst several economic tailwinds.

Key Points:

• Context and Expectations: Despite recent reluctance from global central banks, including the Fed, to adopt hawkish tones, BofA suggests that the RBA might surprise markets with a hawkish stance. Such a move would align with the stabilization seen in the Chinese economy and other positive factors affecting Australia.

• AUD Strength Factors: Several factors could bolster the AUD, such as signs of recovery in China’s economy and property markets, resilience in industrial metal prices, and easing pressures on the Chinese Yuan following interventions by the Bank of Japan.

• Rate Hike Expectations: Although BofA does not foresee additional rate hikes from the RBA, any unexpected hawkish adjustments in inflation forecasts or forward guidance could significantly support the AUD. The current market pricing indicates modest expectations for rate hikes by November.

• Currency Strategy: BofA continues to favor long positions in AUD against currencies like the Canadian Dollar (CAD) and the New Zealand Dollar (NZD), citing a year-end target of 0.69 for the AUD.

Conclusion:

As the RBA's next meeting approaches, investors are advised to monitor for potential hawkish signals that could influence both local and broader currency markets. With several supportive economic indicators and market conditions, any surprises from the RBA could provide significant momentum for the AUD, particularly in currency pair trades against the CAD and NZD.

Synopsis:

Goldman Sachs highlights recent market activity suggesting another suspected intervention by Japanese authorities in the USD/JPY exchange rate following the Federal Reserve's latest FOMC meeting. The aim was seemingly to capitalize on post-meeting USD softness and market illiquidity.

Key Points:

• Timing and Scale of Intervention: The intervention reportedly occurred late in the London session, around 9:15-9:45 PM, with approximately $33 billion USD transacted during this period. Goldman estimates that roughly 70% of these transactions were executed by the Ministry of Finance (MoF) and Bank of Japan (BoJ), driving USD/JPY from 157.50 down to 153.00 before it settled around 154.70.

• Market Reaction: Following the suspected intervention, there was significant buying activity from retail and macro traders, exploiting the dip. This buying pressure helped push the pair back up to the 155.50-156.00 range as the European markets opened the following morning.

• Ongoing Intervention Strategy: The interventions have continued throughout the week, with this being the fourth wave. Despite these efforts, USD/JPY levels have returned to those seen at the week's start, leading to questions about the long-term efficacy of Japan's intervention strategy against the backdrop of broader macroeconomic factors.

• Volume and Market Sentiment: Trading volumes were slightly above average in the Asia session following the intervention, normalizing later but again picking up as London trading began. The persistent market willingness to "lean into" these interventions suggests a robust challenge to Japan's efforts given the current macroeconomic environment.

Conclusion:

Goldman Sachs' analysis of the suspected interventions in the USD/JPY market post-FOMC reveals a complex interplay between Japanese policy actions and market forces. While the immediate effects of the interventions have temporarily influenced exchange rates, the overall effectiveness remains under scrutiny as the market continues to test these interventions against prevailing global economic conditions.

• A large number of expiries for today's New York cut

• EUR/USD has a total of USD 18 billion between 1.0600 and 1.0785

• Sizeable AUD/USD expiries, AUD 1.5 billion between 0.6490 and 0.6500

• Another AUD 920 million worth of deals between 0.6520 and 0.6540

• The largest yen expiries are away from market at 152.50, USD 1.35 billion

For more click on FXBUZ

• Yen weakens, paring sharp rise after suspected intervention nL1N3H50CR

• Ex-official: FX intervention signals 160 yen line in the sand nL1N3H505L

• However, Japan will likely struggle to keep a lid on USD/JPY nL1N3H50LB

• Huge rate differential between Fed and BOJ keeps USD/JPY bias on the upside

• USD/JPY chart medium-term outlook is still very bullish nL1N3H50G3

• Spot has seen a 154.15-156.28 range, according to EBS data, on Thursday

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

• EUR/GBP pierced the thin daily cloud then slid back below it Wed

• EUR rallies a second time above the cloud but again fails to hold the break

• Long upper candle shadows hint at demand fade

• Those are encouraging signs for our 0.8625 short

• Our target is 0.8505 with a profit stop at 0.8565

• Daily resistance at 0.8561 and support at 0.8547, session low

  For more click on FXBUZ

• EUR/USD's failure in April under the 1.0611 Fibo led to a recovery moves

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

• The negative alignment of the tenkan and kijun lines still points to a drop

• However, 14-day momentum is on course to turn positive at Thursday's close

• We are short at 1.0725 for a slump to our 1.0525 target

• EUR/USD Trader TGM2334. Previous update nL1N3H40BB

• USD/JPY has scope for a break above Monday's 160.24 new multi-year high

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

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

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

• USD/JPY looks set for big gains despite Japan's worries nL1N3H40FH

• EUR/JPY 165.68-167.37 EBS range on Thursday. USD/JPY Trader TGM2336

• USD/CNH routed, falls to 7.2168 from 7.2321; last 7.2242

• Bearish, as 55 DMA 7.2319 crumbles after 200 DMA break

• Next stop is 38.2% Fibo, near 100 DMA 7.2082

• USD/JPY coming off weighs on USD/AXJ broadly; last 155.36

• Risk-on from 2.4% rally in HK stocks also boosts yuan

• China mainland still closed for Labour Day break

• For more click on FXBUZ

• +0.07% near the top of a tight 1.2521-1.2538 range with steady flow on D3

• Sterling is firmer with risk appetite, as E-mini's and commodities rise

• BoE rate decision next week - no change, but optimism on inflation viable

• Like the Fed, BoE will be dependent on upcoming data for the timing of cuts

• Charts; 5, 10 & 21 DMAs conflict, 21-day Bollinger bands contract

• Daily momentum studies rise - the daily signals show no strong bias

• Monday's 1.2569 high then 1.2596, 50% of the March/April fall are resistance

• 1.2475 10-day moving average and early London 1.2467 base are first supports

For more click on FXBUZ

• EUR/USD opened +0.44% @ 1.0713 after US yields eased in wake of Fed decision nL1N3H42A5

• A plunge lower in USD/JPY on suspected intervention also weighed on USD nL1N3H42TN

• EUR/USD traded in a 1.0707/20 range while USD/JPY continued to whipsaw

• Heading into the afternoon the EUR/USD is unchanged at 1.0710/15

• EUR/USD support is at the 10-day MA @ 1.0694 and a close below adds pressure

• Resistance is at the April 26 high at 1.0753 and 200-day MA at 1.0800

• EUR/USD may consolidate ahead of the US non-farm payrolls on Friday

• Short-term bias is bullish while US yields correct lower

• For more click on FXBUZ

Synopsis:

Bank of America provides an analysis of the Federal Reserve's recent FOMC meeting, highlighting a continued cautious approach with a shift to a wait-and-see policy stance. The Fed's deliberation on inflation and market dynamics suggests a possible rate cut in December, reflecting prolonged uncertainty in economic recovery.

Key Points:

• Wait-and-See Policy Stance: In response to unexpected inflation data, the Fed has adopted a wait-and-see approach, indicating a readiness to maintain current interest rates for an extended period. Chair Powell emphasized the need for more conclusive data to achieve the desired confidence level before implementing rate cuts.

• Balance Sheet Policy Adjustments: The Fed set a new cap of $25 billion for Treasury securities runoff, slightly below BofA's anticipated $30 billion, suggesting a slightly slower pace of balance sheet reduction. This decision aims to mitigate potential disruptions in funding markets and extend the runoff duration.

• Inflation Outlook: BofA maintains its forecast for a rate cut in December, predicated on the expectation that inflation will decline more slowly and remain more persistent than initially projected. The high threshold for further rate hikes was supported by Powell’s remarks.

• Market Reaction: The rates market perceived the Fed's communications as dovish, with minimal initial reaction to the statement but a more pronounced response during Powell's press conference. This resulted in lower rate expectations and spurred a dip-buying behavior in the market.

• USD Performance: The DXY experienced a slight decline, with the market's dovish interpretation leading to a moderate underperformance of the USD against higher-beta currencies. This aligns with equity rallies and a modest drop in U.S. yields. BofA expects the USD to depreciate later in the year, contingent on clearer signals of impending rate cuts.

Conclusion:

The Federal Reserve's latest deliberations underscore a strategic caution in monetary policy, with an emphasis on monitoring economic indicators closely before making further adjustments. BofA anticipates a potential rate cut by the end of the year, depending on the trajectory of inflation and economic recovery.

• USD/JPY trades 1.05% higher in Tokyo after the late 2.2% fall post-FOMC

• BOJ March minutes - long-term interest rates should be set by markets

• Fed is concerned by recent inflation data - remains data-driven on cuts

• The short-term outlook for yield differentials is they will remain wide

• If the USD/JPY fall was the BOJ - they are in a guerrilla war with markets

• Charts 5, 10 & 21 DMAs head gently higher with 21-day Bollinger bands

• A positive setup - next resistance is 156.62, 50% of this week's fall

• Earlier 154.15 low the Wednesday's 153.00 base are initial supports

  For more click on FXBUZ

• USD/KRW tamped down to 1380.8 from last close 1382.0

• Hit a low of 1378.0, teasing break of 23.6% Fibo 1378.3

• Kospi -0.2% in wake of as-expected FOMC decision nL1N3H31SH

• BOK ready to use market stabilization measures nP8N3EO008

• S. Korea Apr inflation below forecasts nP8N3GP00T

• Core inflation rises the slowest since Dec 2021

• For more click on FXBUZ

• USD/CNH cracks 200 DMA support 7.2363, last 7.2350

• Settles around next chart floor 55 DMA 7.2321 for now

• USD/JPY plunge suggests Japan intervened in FX again

• Sharp drop to as low as 153.00 tanks DXY, dents USD/AXJ

• USD/JPY outweighs patient tone from FOMC nL1N3H31SH

• Powell still sees possible rate cut but not soon

• For more click on FXBUZ

• USD/JPY recovers in Asia after sharp fall in NYK on suspected intervention

• Rallies to 155.35 from NYK low of 153.00 as bargain hunters step in

• Wednesday range 157.99-153.00, Thursday Asia range 154.15-155.35

• Rapid 157.58-153.00 post-Fed drop occurred at NYK close/ Wellington open

• Japan had said stands ready to deal with FX matters around the clock

• Picked right time; market thin and Fed was not as hawkish as feared

• Fed keeps rates unchanged, flags 'lack of further progress' on inflation

• Traders relieved as Powell said rate increases remained unlikely

• Initial resistance at 155.50-70; 155.76 is 38.2% of 160.24-153.00 drop

• Support at 154.00-20, 153.00, 152.61, the 38.2% Fibo of Dec-April drop

• For more click on FXBUZ

• AUD/USD opens +0.79% after the Fed and USD/JPY collapse impacted trading

• The Fed retained a cautious-patient dovish bias at their meeting today nL1N3H31SH

• US yields and USD fell while Wall Street initially soared higher nL1N3H42A5

• A frenzied selloff on Wall Street in the last hour saw big gains evaporate nL1N3H42NT

• There was more volatility in USD/JPY as it collapsed from 157.50 to 153.00

• Suspected MOF intervention behind move - before it rebounded to 155.00 nL1N3H42TN

• AUD/USD now above the 10, 21 and 200-day MAs to give it a bullish bias

• Support is at 0.6500/05 where the 10 & 21-day MAs converge

• Resistance is at the April 29 high at 0.6587 and April 9 high at 0.6644

• Focus today will be on the USD/JPY and Asian equity market reaction to Fed

• For more click on FXBUZ

Synopsis:

Following the Federal Open Market Committee (FOMC) meeting in May, CIBC provides insights into Chair Jerome Powell’s remarks and the Fed's current stance on monetary policy. The central bank maintained interest rates and adjusted the pace of its balance sheet reduction, reflecting a data-dependent and patient approach amid mixed economic signals.

Key Points:

• Policy Decisions: The FOMC held interest rates steady and announced a slowdown in the balance sheet runoff starting in June, with Treasury securities runoff reducing to $25 billion from $60 billion, while maintaining the mortgage-backed securities cap at $35 billion.

• Inflation and Economic Outlook: Powell acknowledged the lack of progress on inflation in some areas but balanced this with recognition of advancements already made. He indicated that the recent high inflation readings might be temporary, maintaining a cautious optimism about the potential for rate cuts later this year.

• Policy and Economic Slack: Powell reiterated that the existing policy might become sufficiently restrictive over time and highlighted that the U.S. economy's response to interest rate changes has weakened over the years. The Fed continues to monitor the relationship between economic slack and inflation closely, requiring more evidence of genuine overheating and its impact on prices before adjusting policy significantly.

• Fed’s Patience and Data Dependence: The Fed Chair emphasized a patient approach, influenced by recent economic data showing a mixed picture of inflation trends. Powell's comments reflected a reluctance to shift quickly from the established narrative, despite a series of less favorable inflation reports in the last three months.

• Labor Market and Inflation Threshold: Powell discussed the progress in moderating labor market dynamics and wage growth. He pointed out that while bringing inflation back to the 2% target remains crucial, the Fed does not have a strict timeline, aiming to avoid undue disruption in the labor market, especially now that inflation has dropped below 3%.

Conclusion:

The May FOMC meeting underscored the Fed's cautious and methodical approach to monetary policy in the face of uncertain economic conditions. Chair Powell’s comments highlighted a balanced perspective on current economic challenges, with a focus on being responsive to incoming data rather than preemptive.

• Some US bulls disppointed Fed Chair Powell didn't note rate hike risk

• USD/JPY fell to 157 where dip-buyers were waiting for a discount

• Initial dollar selling on Fed statement and Powell were overreactions

• Fed just confirmed progress on inflation stalled, but rates are restrictive

• Wed's earlier 157.99 high by 158 was also by 61.8% of Monday's plunge

• With threat of Japan yen intervention, run at 160+ may wait for top US data

• Friday's jobs and ISM non-manufacturing reports are now the focus

For more click on FXBUZ