• UDS/CAD rallied above the 10- & 21-DMAs with help from US Q1 ECI data

• ECI data fueled concerns inflation is running hot again, sank riskier assets

• Commodities LCOc1XAU=HGv1 fell sharply as did stocks ESv1

• US yields US10YT=RR rallied to drive broad based US$ gains

• USD/CAD rally helped to increase bullish technical signals

• Daily RSI turned upward and a 6-session high was struck

• Rally stalled near the down trend line off the April 16 daily high

• Break of that line would complete a bullish flag continuation pattern

• Completion of pattern suggests USD/CAD could break November's monthly high

• Rally above that high brings the 1.39755 (D3) 2022 yearly high into focus

• For more click on FXBUZ

Synopsis:

MUFG discusses the recent weakness of the Japanese yen and its potential implications for the Chinese yuan, suggesting that China might allow the yuan to depreciate further in response to Japan's currency movements and domestic economic signals.

Key Points:

• Yen Weakness: The yen has shown significant volatility, recently relinquishing some of its gains, which has pushed USD/JPY back to the 157.00 level. This movement is reminiscent of the patterns observed during Japan's last currency intervention in autumn 2022.

• Implications for the Yuan: The ongoing weakness of the yen is fueling speculation that China may permit a further weakening of the yuan. The People's Bank of China (PBoC) has been adjusting the daily currency fix slightly higher, which has allowed USD/CNY to approach the upper limit of its daily trading band around 7.2480.

• China's Economic Indicators: Recent economic data from China, including softer than expected PMI surveys for April, suggests that the country's economic recovery is losing momentum as it enters Q2. The surveys indicated a particular decline in business confidence in the non-manufacturing sector, raising concerns about the overall health of the Chinese economy.

• Policy Expectations: While there is speculation about further yuan depreciation, MUFG believes that Chinese policymakers are likely to favor a controlled, gradual appreciation of USD/CNY towards the levels seen last year around 7.3000, rather than a sharp, one-off devaluation.

Conclusion:

The recent fluctuations in the yen and emerging economic data from China are contributing to expectations of a potential policy shift that could see a weakening of the yuan.

• Cable elicited support pre-1.2500 after USD rose on hot US labor cost data

• US Q1 ECI up 1.2% vs 1.0% forecast. 1.2500 approximates to Monday's low

• 1.2554 was Ldn am high; 1.2561 was Asia high; 1.2569 was Monday's high

• Hot ECI data is boost for hawks opposed to Fed rate cut this year

• Chicago PMI due at 1345 GMT; 45 f/c. Consumer confidence 1400 GMT; 104 f/c

• BoE raises lifetime loss estimate for QE programme by 5 billion pounds

Synopsis:

CIBC analyzes the recent Canadian GDP data for February and the advanced estimate for March, noting a quick fading of economic momentum as Q1 progressed. The implications for upcoming Bank of Canada (BoC) policy shifts are discussed, with potential rate reductions on the horizon.

Key Points:

• GDP Growth Fades: February's GDP growth in Canada was modest at 0.2%, slightly below consensus forecasts, and following a downward revision of January's growth from 0.6% to 0.5%. The advance estimate for March suggests that economic activity may have stalled, indicating a weakening momentum as Q1 concluded.

• Sector Performance Variations: Key sectors such as mining, oil & gas, and air transportation showed strength in February, contrasting with declines in utilities and manufacturing. The transportation manufacturing sector, in particular, experienced a notable drop due to ongoing retooling shutdowns, affecting overall manufacturing output.

• March's Flat Growth Estimate: The advance estimate for March indicates no change in GDP, with declines in manufacturing and retailing contributing to the stagnation. This suggests a weak end to the quarter, potentially affecting projections for Q2.

• Economic Implications: The overall Q1 GDP growth is now estimated at a 2.5% annualized pace, weaker than initial estimates and just below the BoC's 2.8% forecast in its April Monetary Policy Report. The slowdown towards the quarter's end poses downside risks to the BoC's Q2 growth expectation of 1.5% annualized.

• Potential BoC Policy Response: Given the waning economic momentum and assuming inflation remains controlled, CIBC suggests that the BoC might commence a gradual reduction in interest rates starting from the June meeting. This adjustment would aim to stimulate economic activity in response to the observed slowdown.

Conclusion:

The recent Canadian GDP data highlights a rapid loss of economic momentum in early 2023, prompting CIBC to predict potential easing of monetary policy by the BoC. With key sectors showing mixed performance and overall growth tapering off towards March, the central bank may need to adjust its strategy to support the economy.

Synopsis:

Bank of America analysts indicate that Japan's Ministry of Finance (MoF) likely implemented three separate rounds of currency intervention on April 29 to support the yen, as observed through notable USD/JPY fluctuations. These actions could have significant short-term and long-term implications for the currency pair.

Key Points:

• Intervention Details: USD/JPY experienced unusual price movements on April 29, suggesting three potential intervention rounds by the MoF. The first intervention appeared around 1 PM JST, with subsequent actions pushing USD/JPY significantly lower from peaks around 160 down to 145.5, before stabilizing around 156.6.

• Short-Term Market Implications: In the short term, BofA expects the MoF might continue with additional interventions if the currency pair approaches or exceeds critical levels, to prevent further testing of their resolve. This could drive USD/JPY into the 151-153 range as the market reacts to Japan's defensive measures.

• Long-Term Considerations: Over the longer term, the MoF may need to intensify and prolong its intervention efforts compared to 2022 due to persistent upward pressure from carry trades and Japan's structural deficit. This pressure is likely to continue until there is a shift in the Federal Reserve's interest rate policy.

• Limitations and Risks of Interventions: BofA notes that there are practical limits to how much the MoF can intervene, estimated at around $300 billion for 2024. A delay in the Fed's expected rate cuts or an unforeseen rate hike could challenge these limits, potentially pushing USD/JPY above 160 and necessitating a response from the Bank of Japan (BoJ).

• Focus on Intervention Scale: Market participants will likely focus on the scale of future interventions. A significant intervention amount (greater than ¥10 trillion or approximately $65 billion) could be perceived negatively for the yen, as it might suggest a rapid depletion of Japan's forex reserves.

Conclusion:

The actions taken by Japan's MoF on April 29 underline the complexities of managing national currency values amid global financial pressures.

• AUD/USD traded 0.65675-0.65145 overnight, NY opened near 0.6530, down -0.57%

• China April NBS mfg PMI 50.4 from 50.8 in March; fueled doubt on econ growth

• Data helped rally USD/CNH up to 7.2572 (D3) which helped weigh on AUD/USD

• Commodity DCIOc2HGv1, equity ESv1 drops added weight on AUD/USD, risk

• AUD/USD fell away from the thin daily cloud, pierced the 55- & 200-DMAs

• Pair remained above the 10- & 21-DMAs but daily RSI turned downward

• Investors focused on looming US jobs reports, Fed meeting, ISM mfg PMI

• US Q1 employment cost a risk Tues., will give some color on wage inflation

• For more click on FXBUZ

There are fundamental and technical factors that point to even bigger USD/JPY gains in the days and weeks ahead to 165.

The yen dropped against the dollar on Tuesday, giving up some of its sharp gains the previous day sparked by suspected intervention by Japanese authorities.
On Monday USD/JPY dropped from 160.24 to 154.40, on the EBS, before recovering.

While the Bank of Japan left interest rates on hold at its recent meeting, the policy rate differential between the Federal Reserve and the BOJ remains sizeable and keeps USD/JPY's bias on the upside.
FX traders could take USD/JPY much higher, despite Japanese authorities' continuing concerns over a weakening yen.

Earlier in April USD/JPY overcame the 152.60 Fibo, a 38.2% retrace of the major 277.65 to 75.31 (1982 to 2011) drop, which keeps the underlying market structure quite bullish for gains back above the 160 level.
Fourteen-week momentum remains positive, adding the upside potential.

For more click on FXBUZ

• UK BRC shop price index falls for second straight month, down 0.3%

• In turn, the yearly rate has fallen to its lowest level since Dec 2021

• While this indicates easing price pressures ahead of the national print

• Base effects are expected to take CPI at or close to 2%

• Therefore, the bigger focus for the BoE will be on services CPI

• COMMENT-Sterling's rebound faces key test as Fed, NFP await nL1N3H21QC

For more click on FXBUZ

• AUD/USD falls to 0.6515 as disappointing data continues to weigh on the AUD

• Australian retail sales down 0.4% in March vs forecast increase of 0.2%

• 0.6515 is lowest level since Thursday (0.6511 is 21-day moving average)

• Monday's high was 0.6587 (highest level since April 10, hot US CPI data day)

• Two-day Fed meeting gets underway later. RBA meets next week (May 7)

• China overtakes Japan in April as Australia's top coal market nL1N3H30BA

• Cable falls to 1.2525 as USD strengthens before two-day Fed meeting starts

• 1.2525 is lowest level since Monday's 1.2569 peak (high since April 11)

• Bids expected around 1.2500 (1.2497 was Monday's low, in early Asian trade)

• CFTC data showed net GBP position recently flipped from long to short

• BoE rate decision next week: HSBC expects 8-1 hold vote again (as per March)

• UK local elections this week (Thursday); PM Sunak's Tories face big losses

• EUR/USD's failure earlier in April under 1.0611 Fibo led to a rebound

• 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 highlights a bearish market

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

• We are short at 1.0725 in anticipation of a slump to our 1.0525 target

• EUR/USD Trader TGM2334. Previous update nL1N3H20HM

• Speculators pile into the dollar for two major reasons nL1N3H10IN

• AUD/USD reverses Mon gains, extends pullback to 0.6522

• Dipping under 200 DMA support 0.6524, spooking longs

• More AUD bulls may soon bail, sending it toward 0.6500

• 50% retracement at 0.6503 may be next barrier to fall

• Australia retail sales miss dented AUD nL1N3H303M

• DXY bounces as USD/JPY recovers, but UST yields soft

• For more click on FXBUZ

• AUD/USD opened +0.51% at 0.6566 as fall in USD/JPY weighed on the greenback nL1N3H20OC

• AUD/USD came under light pressure early Asia as USD clawed back some ground

• It traded down to 0.6550/55 before fall extended following Aus retail sales

• Aus retail sales came in much worse than expected to complicate RBA outlook nL1N3H303M

• China PMI came out at same time with services PMI undershooting expectations nAZN1P5257

• AUD/USD fell to 0.6532 and is around 0.6535 into the afternoon

• Support is at the 200-day MA at 0.6524 and the 21-day MA at 0.6511

• Resistance is at 50% of Dec-April fall @ 0.6616 with sellers ahead of 0.6600

• A close below 0.6510 would suggest a short-term top is in place at 0.6585/90

• For more click on FXBUZ

Synopsis:

TD Securities anticipates fluctuating risks for the USD in the short term due to conflicting economic drivers but sees a trend toward a stronger USD through early 2025. The forecast is based on a blend of growth and policy dynamics, with inflation divergence playing a significant role.

Key Points:

• Renewed FX Market Interest: Recent developments have reignited investor interest in the forex market as a platform for expressing macroeconomic and geopolitical views. However, the presence of conflicting drivers increases the complexity of market analysis.

• Upgraded USD Outlook: TD has revised its outlook on the USD, expecting further gains into early 2025. This revised forecast is informed by a combination of growth and policy shocks. In particular, inflationary pressures and the divergence in interest rates are pivotal factors.

• Inflation and Rate Divergence: The divergence in inflation rates, particularly between the US and other regions, is becoming a dominant force. Although global growth rates are converging, which generally counters USD strength, the U.S.'s pronounced inflation dynamics are starting to have a more substantial impact.

• Volatility and Market Sensitivity: The current low volatility in FX markets is viewed as unsustainable, particularly given the backdrop of geopolitical uncertainty and inconsistent inflation data. These conditions are tightening financial conditions, and markets are likely to become more reactive.

• Central Bank Dilemmas: The divergence in inflation rates poses a significant challenge, compelling central banks to make tough choices between supporting growth and controlling inflation. This situation could lead to increased market disruptions and affect currency valuations, particularly the USD.

Conclusion:

TD Securities' analysis suggests a complex and volatile period ahead for the USD, with potential for both short-term risks and medium-term gains.

• Up 0.25% after the Tokyo fix, as the dust settles on Monday's volatility

• We have no official confirmation of BOJ intervention, but it is expected

• Stronger than forecast Japanese factory output but softer retail sales

• The mixed data provides no strong reason for the BOJ to change policy

• Charts: 21-day Bollinger Bands, 5, 10 & 21-day moving averages head north

• Daily charts remain positive - a close below 154.01 21 DMA would be bearish

• Horizontal Tenkan and Kijun lines suggest a period of consolidation

• 154.40 early Europe low and New York's 156.88 high first support/resistance

For more click on FXBUZ

• USD/CNH perks up with USD/JPY bounce, last 7.2439 from 7.2420

• May reclaim 61.8% Fibo 7.2461 if USD/JPY keeps rising

• That will avoid Bollinger downtrend channel at 7.2450

• PBOC fix lowered three pips to 7.1063; deviation -1400 pips

• China official and Caixin manufacturing PMIs due soon

• Both expected to show a slower pace of expansion in Apr

• For more click on FXBUZ

• -0.05% in early Asia after closing up 0.27% with the U.S. dollar off 0.28%

• Yields spreads were steady, 10yr bund -5bp 2.526% and 10yr UST -5bp 4.612%

• German inflation edged higher to 2.4% ahead of EZ CPI later today, poll 2.4%

• Charts - 5, 10, and 21-day moving averages coil, 21-day Bollinger bands slip

• Daily momentum studies rise - the downtrend has stalled - neutral signals

• 1.0745 Fibo resistance, 0.382% of the March/April fall capped on the close

• Close above 1.0745 would target a test of the 1.0790 0.5% retracement

• 1.0690 - 1.0729 New York range is initial support and resistance

• 1.0700 652mln and 1.0750 1.046BLN are the close strikes for April 30th

  For more click on FXBUZ

• AUD/USD opens +0.51% after US yields eased and USD broadly weakened nL1N3H21T3

• A wild ride in USD/JPY on intervention rumours dominated FX action nL1N3H20OC

• AUD benefited from a rise in risk assets as copper continued surge higher nL1N3H22GOnL1N3H20JQ

• Support is at the 200-day MA at 0.6524 and 21-day MA at 0.6511

• Resistance is at 50% of Dec-April fall at 0.6616 and April 9 high at 0.6644

• Aus March retail sales today may cause some movement, but unlikely to impact

• China Mfg PMI for April is out today with market expecting 50.3

• Bias is for higher, but with FOMC looming, movements may be limited

• For more click on FXBUZ

• USD/JPY trades a cautious 156.08-156.28 range Tue as Japan markets reopen

• Consolidation likely after a wild 160.24-154.40 range Mon in thin markets

• Follows suspected yen-buying intervention by Japan for 1st time in 18 months

• Authorities more concerned with speed of USD rise rather than direction

• GRAPHIC-Five charts on the Japanese yen's decades-long drop

• Sticky U.S. inflation, yawning U.S.-Japan yield differentials support USD

• Fed rate decision Wed, U.S. payrolls Friday key for direction

• Fed in a holding pattern as inflation delays approach to any soft landing

• Japan industrial output, unemployment rate, retail sales due Tuesday

• Support 155.00-10, 154.40-50, resistance 157.00-20, 157.80

• For more click on FXBUZ

Synopsis:

Société Générale assesses the upcoming week's key economic data releases, predicting potential currency movements based on expected regional economic performances. The focus is on the potential for upside surprises in the Eurozone and how they could influence EUR/USD, along with implications for other currency pairs like AUD/USD and USD/NOK.

Key Points:

• Recent Market Movements: Following a significant drop in EUR/USD due to U.S. CPI data two weeks ago, the currency pair has recovered approximately half of its losses. This recovery sets the stage for a potentially volatile week given several high-profile economic reports due in the coming days.

• Influence of Economic Surprises: SocGen suggests that positive surprises in European economic data could have a more pronounced effect on the markets compared to strong U.S. data, given current expectations. Conversely, any unexpected weakness in U.S. data might weigh more heavily than sluggish European results.

• FOMC Meeting Expectations: The Federal Open Market Committee (FOMC) is expected to maintain a cautious tone regarding rate cuts. The upcoming payroll data is anticipated to affirm a tight U.S. labor market unless it significantly underperforms expectations.

• Potential for European Data Surprises: There is notable anticipation for the upcoming Eurozone CPI and GDP data, with SocGen predicting potential upside surprises (CPI at 2.5% and GDP growth at 0.3% quarter-over-quarter). Positive results here could bolster the EUR/USD, especially if U.S. data does not surpass expectations markedly.

• Implications for Other Currencies: Positive developments in risk sentiment combined with a stable or strengthening euro could drive AUD/USD towards 0.68 and push USD/NOK down to 10.60.

Conclusion:

This week's array of critical economic data releases from both the U.S. and Europe is poised to play a significant role in shaping currency market dynamics. SocGen highlights the potential for significant currency movements based on regional economic performances and overall market sentiment.

• USD/JPY traders cogitate on dive following a likely 1990 high MoF defense

• The 160.245-154.40 plunge came amid thin holiday and overbought conditions

• Japan FX policy diplomat Kanda all but confirmed the intervention

• He said more could come any time in "speculative, rapid and abnormal" mkt

• The 156.88 recovery high ran into resistance by the daily tenkan

• Another brief slide was seen from there in a nervous market pre-month-end

• And before ADP, JOLTS and Fed on Wed and Friday's employment report

• Though intervention could cap extremely O/B prices by 1990's 160.35 peak

• A sustained selloff would need softening US data and renewed Fed cut pricing

• The BoJ punted last week, putting supporting yen firmly on the MoF's back

• Q3, Q4 2023 corrections were caught by 55-DMA, weekly cloud top

• Those supports are currently at 146.08/25 and a bit out of reached

• At least w/o more interventions and or a huge dovish NFP miss on Friday

For more click on FXBUZ

• Cable through its 200-DMA (1.2556) emboldening bulls

• Daily close sets up potential move to 1.27 (pre-US CPI level)

• EUR/GBP heavy, but 0.85 likely to put a floor under the cross

• Slew of U.S. data to drive price action (QRA, Fed, NFP)

• COMMENT-Sterling's rebound faces key test as Fed, NFP awaits nL1N3H21QC

For more click on FXBUZ

• NY opened near 1.0720, selling took hold as US$ was bid in early NY

• 1.06905 traded on EBS, buyers emerged, pair neared 1.0725 late

• Lower US yields US10YT=RR, USD/CNH drop to 7.2350 (D3) helped buoy

• Equity ESv1 gains & gold XAU= turning positive helped weigh on US$

• EUR/USD held below the 21-DMA, 50% Fib of 1.0885-1.0602 late in the day

• Techs are mixed; daily RSI rising but monthly RSI is falling

• China April NBS mfg, non-mfg & Caixin mfg PMIs are data risk in Asia

• EZ April HICP, Q1 GDP & US Q1 employment costs a risks in Europe, NY

• For more click on FXBUZ

Synopsis:

ANZ projects potential downside risks for the upcoming U.S. Nonfarm Payrolls (NFP) based on recent employment trends and weak April PMI data. Meanwhile, the upcoming Federal Open Market Committee (FOMC) meeting could provide modest support for the USD, though much of the hawkish sentiment may already be priced in.

Key Points:

• Weakening Employment Indicators: ANZ points out discrepancies in U.S. employment data, with the household survey suggesting weaker conditions than the headline nonfarm payrolls figures. The April Flash PMIs employment composite index dipped below 50, marking the lowest point since June 2020 and indicating significant softening in employment, which could foreshadow broader economic slowdowns.

• PMIs and Payroll Trajectory: While PMIs have not consistently predicted monthly payroll outcomes, ANZ notes that they generally track the broader trends in employment changes. The recent sharp decline in the employment index is particularly concerning as it might signal a forthcoming downturn in payroll numbers.

• Upcoming Employment Data: Further insights will be required to confirm these trends, with additional data points such as the Conference Board’s job differential gauge anticipated this week. These metrics will be crucial in solidifying expectations for the labor market ahead of the official payroll report.

• FOMC Meeting Outlook: The FOMC's stance appears modestly supportive for the USD, driven by a shift toward more hawkish commentary from Fed officials during the pre-meeting blackout period. However, ANZ suggests that market pricing likely already reflects expectations for any hawkish statements from Chair Powell.

• USD Strategy: Given the potential for weaker payroll data and the anticipated impact of the FOMC meeting, ANZ leans towards a softer USD outlook heading into next week’s labor market update.

Conclusion:

With key employment data on the horizon and the FOMC meeting set to take place, ANZ advises caution regarding the USD's position. Investors should prepare for potential volatility in the currency markets, particularly if employment indicators continue to show weakening and if the FOMC's support does not exceed market expectations.