Synopsis:

Credit Agricole provides insights into the implications of the upcoming Australian CPI data release on the AUD's performance and the Reserve Bank of Australia's (RBA) monetary policy outlook. The bank highlights the challenges posed by sticky services inflation and rising costs in certain sectors, which could influence the pace of inflation deceleration.

Key Points:

• CPI Data Release: The Australian CPI data scheduled for release on Wednesday is anticipated to play a significant role in shaping the AUD's performance for the week. This follows similar trends observed in New Zealand’s recent inflation data, where falling goods prices were offset by persistent services inflation.

• Inflation Trends and Expectations: While goods prices, particularly food, are expected to continue their downward trajectory, services inflation remains stubborn, particularly due to rising education, housing costs, and higher insurance premiums. These factors contribute to the complexity of reducing inflation to within the RBA’s target range of 2-3%.

• Market Consensus on Inflation Rates: Consensus forecasts suggest a decrease in headline inflation from 4.1% year-over-year (YoY) to 3.5% YoY for Q1. The RBA’s preferred measure, trimmed mean inflation, is also expected to show a decline, albeit more modest, from 4.2% YoY to 3.8% YoY.

• Implications for RBA Monetary Policy: The data is expected to solidify market expectations that the RBA will likely hold off on any rate cuts until late 2024, if at all this year. The RBA’s own forecasts for H1 2024 predict headline inflation at 3.3% and trimmed mean inflation at 3.6%, indicating a cautious approach towards easing monetary policy.

Conclusion:

As Australia prepares for a significant CPI data release, Credit Agricole underscores the challenges of managing persistent services inflation alongside declining goods prices. The upcoming inflation figures are crucial for the AUD's trajectory and could reinforce the stance that the RBA may delay rate cuts, awaiting more definitive signs of inflation aligning with its target range.

• Gold drops to $2295/oz - $136/oz below this year's record high

• Gold dropping quickly from $2417.59/oz on Friday

• Rally was extremely stretched when gold reached the record high last week

• Targets for minor corrections of Oct-Apr rise are $2284 and $2194

• Gold traders have established big bet on a rise - lots of profits to book

• Most other markets fairly placid so driver most likely profit taking

•  

• NY opened near 1.0655 after 1.06385 traded on EBS in Europe's morning

• Rally extended with help from surprises to April S&P Global PMIs

• Data indicating slowing business activity sank yields US2YT=RR, US$

• German-US yield spreads US2DE2=RR tightened, risk assets rallied

• USD/CNH slid from its high, stocks ESv1 & gold XAU= rallied

• EUR/USD rallied away from the 10-DMa, hit a 7-session high of 1.0711

• Rising daily RSI, daily bull hammer are concerns for EUR/USD shorts

• German April Ifo, Us March durable goods are data risks Wednesday

• For more click on FXBUZ

Synopsis:

Goldman Sachs analysts express skepticism about the GBP/USD's ability to break through the 1.23 level independently of significant movement in the EUR/USD. Recent positive economic data from Europe has added complexity to the currency dynamics, influencing trader expectations.

Key Points:

• Interdependence of Currency Pairs: Goldman Sachs highlights the interconnectedness between GBP/USD and EUR/USD movements. Analysts at the firm indicate that a breach of the 1.2300 level by GBP/USD is unlikely without the EUR/USD first breaking below the 1.0600 mark, suggesting a strong correlation in the movements of these major currency pairs.

• Impact of European Economic Data: The recent positive surprises in French and German composite Purchasing Managers' Index (PMI) data have provided unexpected support for the EUR/USD, complicating the downward movement through the critical 1.0600 threshold. This resilience in the EUR/USD is seen as a key factor that could prevent GBP/USD from reaching lower levels independently.

• Market Dynamics: The dynamics in the FX market show that traders are closely monitoring both currency pairs, with the performance of the EUR/USD acting as a potential bellwether for movements in GBP/USD. This interplay emphasizes the importance of broader market trends and economic indicators in shaping currency valuations.

• Traders' Sentiment: Despite some bearish sentiment surrounding the GBP due to various economic pressures, the actual market behavior, influenced by positive economic indicators from Europe, may lead traders to adjust their positions and expectations regarding significant breakthroughs in price levels.

Conclusion:

Goldman Sachs advises caution in anticipating significant movements in the GBP/USD without corresponding shifts in the EUR/USD. The recent economic data from Europe, which has bolstered the EUR against expectations, serves as a critical factor in understanding potential future movements in these major currency pairs.

• AUD/USD fell to 0.64415 overnight, buyers emerged and a rally ensued

• Pair rallied above the 10-DMA, hit a 6-session high of 0.6490

• Rally stopped at 0.6490/0.6510 zone, series of daily highs/lows sit there

• Daily RSI is rising, implies short-term upward momentum is in place

• 55- & 200-DMAs, April 12 daily high are targets should resistance break

• Thinning daily cloud could attract price action, sits 0.6770/0.6589

• April monthly doji in place, may be another concern for AUD/USD shorts

• For more click on FXBUZ

Synopsis:

HSBC provides insights into the potential factors slowing the descent of EUR/USD towards 1.05, highlighting persistent wage growth and geopolitical uncertainties as key deterrents to a swift decline. The bank outlines why a gradual adjustment is more likely than a rapid downturn in the near term.

Key Points:

• Inflation Concerns and Wage Growth: Despite a faster-than-anticipated drop in headline inflation, HSBC points out that strong wage growth remains a significant concern that could undermine confidence in inflation staying below the European Central Bank's (ECB) target. This issue was previously emphasized by the ECB as a critical factor in determining the timing of rate cuts.

• Geopolitical Risks and Energy Prices: The ongoing geopolitical tensions, particularly those affecting energy supply chains, present upward risks to energy prices. This volatility in energy costs is likely to restrain the ECB from providing definitive guidance on monetary policy adjustments post-June.

• ECB Policy Outlook: The uncertain economic backdrop, influenced by wages and geopolitical risks, suggests that the ECB may adopt a more cautious stance in its upcoming policy decisions. This could involve delaying or moderating the pace of anticipated rate cuts.

• EUR/USD Forecast: As a result of these factors, HSBC forecasts a gradual rather than abrupt decline in EUR/USD. The bank anticipates that these underlying economic and geopolitical factors will contribute to sustained uncertainty, influencing the currency pair's trajectory.

Conclusion:

HSBC's analysis indicates that significant inflationary pressures, particularly from wages, combined with geopolitical risks impacting energy prices, are likely to prevent a rapid depreciation of the EUR/USD. These elements are expected to lead to a more measured adjustment in the currency pair as the ECB navigates a complex economic landscape. 

• S&P Global services, composite PMI drop from March, are below estimates

• The manufacturing component of PMI fell into contraction territory

• US yields US2YT=RR turned lower on the session, drove US$ lower

• DE-US spreads US2DE2=RR tightened, stocks ESv1 & gold XAU= lifted

• EUR/USD spiked higher, 1.07045 traded on EBS, a 7-session high

• Key resistance near 1.0695 was pierced, is a bullish tech signals

• Rising daily RSI, move above 10-DMA reinforce bullish signs

• For more click on FXBUZ

Synopsis:

Mitsubishi UFJ Financial Group (MUFG) highlights the rising likelihood of intervention by Japanese authorities to support the yen, following strong signals from Japan’s Finance Minister and recent currency trends. The USD/JPY has been hovering just below the crucial 155 level, intensifying intervention expectations ahead of the Bank of Japan’s policy meeting.

Key Points:

• Finance Minister's Warning: Japan’s Finance Minister, Suzuki, has issued a potent warning, indicating that the government is closer to intervening in the forex market to support the yen. This follows a tripartite agreement between Japan, South Korea, and the US acknowledging concerns over the recent weakness of the yen and South Korean won.

• Market Conditions and Intervention Readiness: Suzuki’s statements suggest that the conditions for intervention are primed, marking a significant shift in Japan's stance towards more direct action against excessive volatility in the yen exchange rate.

• Speculative Trading and Yen Weakness: The latest IMM report reveals a continued increase in speculative short positions on the yen, reaching the highest levels since November 2017. This trend underscores the market's bearish outlook on the yen, contributing to its depreciation.

• Concerns Over Economic Fundamentals: Japanese officials are worried that the yen’s recent movements do not reflect the country's economic fundamentals, especially since significant policy changes in March when Japan exited negative interest rates and yield curve control.

• Timing and Effectiveness of Intervention: There is a concern that intervening to support the yen might be less effective if U.S. yields keep rising, potentially strengthening the dollar further. This scenario could diminish the impact of any Japanese efforts to stabilize or strengthen the yen.

Conclusion:

As the USD/JPY approaches the sensitive 155 level, MUFG underscores the heightened risk of intervention from Japan to support the yen. With the backing of recent agreements and the clearest indication yet from Japan’s Finance Minister, markets are on high alert for potential actions that could influence currency dynamics significantly.

Synopsis:

Bank of America previews the upcoming Bank of Japan (BoJ) monetary policy meeting, predicting no changes to the current interest rate targets. Market attention will focus on potential signals regarding future rate hikes and adjustments in Japan Government Bond (JGB) purchases, with implications for the USD/JPY exchange rate.

Key Points:

• BoJ Monetary Policy Meeting Overview: The BoJ is set to conclude its monetary policy meeting on April 26, 2024. Consensus among analysts, including those surveyed by Bloomberg, anticipates that the BoJ will maintain the uncollateralized overnight call rate at 0-0.1%. This follows significant changes made in the previous meeting on March 19, 2024, which included exiting the negative interest rate policy (NIRP) and overhauling the monetary policy framework.

• Market Expectations and Analyst Consensus: The uniform expectation among surveyed analysts suggests a low probability of any policy change at the upcoming meeting. However, the BoJ’s quarterly Outlook Report and subsequent communications from Governor Ueda will be pivotal in providing insights into the central bank's future policy direction.

• Focus Areas in BoJ Communications: Key areas of interest for markets in the BoJ’s forthcoming communications include the potential timing for further rate hikes and plans for tapering its JGB purchases. These factors are crucial for understanding the BoJ's approach to gradually normalizing monetary policy.

• Implications for USD/JPY: In the absence of a hawkish turn from the BoJ, the USD/JPY currency pair may see increased volatility. Market participants might test the 155 level, either triggering intervention from Japanese authorities if perceived necessary, or potentially driving the pair towards 160 if market dynamics support further dollar strength.

Conclusion:

While no changes are expected from the BoJ’s meeting this week, the event remains significant for financial markets, particularly for forex traders focusing on the USD/JPY pair. The forthcoming communications from the BoJ will be crucial in shaping market expectations regarding Japan's monetary policy trajectory and its impact on currency movements.

• EUR/USD 0.05%, USD/JPY -0.04%, GBP/USD 0.03%, AUD/USD 0.01%

• S&P E-minis 0.22%, DAX 0.93%, Nikkei 225 0.3%, FTSE 0.5%

• Dollar chart points to even bigger gains nL2N3GW0RF

• EUR/USD rise provides vital clue about traders' positions nL2N3GW0MH

• Elevated USD/JPY on track for more gains despite Japan warnings nL2N3GW0P7

• GBP/USD rises towards 1.24 on UK services PMI beat nL2N3GW0N9

• AUD/USD-CPI will have a big say on RBA pricing nL2N3GW0Q1

• Option expiries nL2N3GW0CF. U.S. Open nL3N3GW2J6

Foreign exchange participants are waiting with bated breath for Japan's reaction if, or more likely when, USD/JPY hits 155 for the first time since 1990.

Japan on Tuesday issued its strongest warning yet on its readiness to intervene and strengthen the yen, with senior LDP official Satsuki Katayama telling Reuters that "I don't think Japan will face any criticism if it were to act now".

A Reuters poll published last Friday showed 21 out of 23 economists expect Japan to step in at some level to stop the yen weakening further, with 16 of the 21 predicting intervention if USD/JPY reaches 155.
The other five chose 156 or higher.

CFTC data on FX positioning, also published last Friday, showed the net yen short rose to a new 17-year high of 165,619 contracts after USD/JPY vaulted 152.

USD/JPY scaled a fractionally new 34-year EBS high of 154.87 on Tuesday.

Related comments: nL2N3GO0LSnL2N3GR0LZnL2N3GW029nL2N3GW0JB

For more click on FXBUZ

• Cable ascends to 1.2388 on higher than expected UK April services PMI

• 54.9 vs 53.0 forecast. 1.2388 = intra-day high (1.2332 was early Ldn low)

• 1.2372 was pre-UK PMI high, as EUR/USD rose on German services PMI beat

• Offers expected pre-1.24 if GBP/USD extends north (1.2391 was Monday's high)

• BoE chief economist Pill to speak at 1115 GMT. Next BoE rate decision May 9

• UK budget deficit overshoots, turning fiscal screw on Sunak government

• EUR/USD has been trading placidly for past year

• Vols suppressed with bulk of trading within 1.05-1.10

• Traders have unwound a $20billion bet on a rise since December

• Following 2022 intervention EUR/USD soared 0.9528 to 1.1034

• EUR/USD then staged minor correction reaching 1.0458 - 38.2% 0.9528-1.1034

• Since trading 2023 low at 1.0448 last Oct pair has done little

• Should BOJ intervene traders have few bets on a rise when a rise is likely

• Moves few are prepared for are usually quick and far reaching

• Cable eases to 1.2332 on higher than expected UK March borrowing data

• 11.9 billion pounds vs 10.2 billion forecast. 1.2332 = intra-day low

• 1.2299 was Monday's five-month low, after pound fell on BoE's dovish Ramsden

• Recovery rally from 1.2299 topped out 5 pips shy of 1.2367 (pre-weekend low)

• UK April flash PMIs due 0830 GMT: services forecast at 53.0; mfg f/c at 50.4

• BoE chief economist Pill to speak at 1115 GMT. Next BoE rate decision May 9

• Bear bias is holding and our long play is in trouble

• Late Monday recovery did form a hammer candle (bullish)

• However, a soft start Tuesday keeps downside risk alive

• Squeeze point is up in the mid-1.24s and high 1.24s the turning point

• Key support at Mon's 1.2299 2024 low

• Fourteen day momentum confirming latest weakness but is stretched

• We will maintain the long for now

  For more click on FXBUZ

• USD/JPY rose to break and register a weekly close above the huge 152.60 Fibo

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

• That is a very bullish sign, backed by continued positive 14-week momentum

• Scope for much bigger gains to eventually retest the 160 psychological level

• A fall and weekly close under 152.60 Fibo would be a negative development

• USD/JPY Trader TGM2336. EUR/JPY 164.65-165.00 EBS range on Tuesday

• 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.