• Cable extends south to threaten 1.2467 following Riksbank rate reduction

• 1.2467 was last week's low. It is also 50% retracement of 1.2299-1.2634

• Riksbank rate reduction is boost for doves advocating BoE rate cut in June

• Two of the nine Times Shadow MPC members want BoE to cut rates this week

• Ramsden may join Dhingra in voting for cut on Thursday. 5-4 for cut in June?

• GBP/USD support points below 1.2467 include 1.2450 and 1.2427 (61.8% Fibo)

• EUR/USD failed to register a daily close under the 1.0611 Fibo in April

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

• 14-day momentum has recently turned positive, highlighting the shift in bias

• A break and daily close above the Ichimoku cloud would be quite bullish

• The daily cloud currently spans the 1.0824-1.0838 region

• EUR/USD Trader TGM2334. Previous update nL1N3HA0HX

• Expectation of dovish BoE rate hold Thursday is weighing on the pound

• 1.2484 was cable low in Asia, lowest level since May 2 (1.2634 = May 3 high)

• Two of the nine Times shadow MPC members advocate BoE rate cut Tuesday

• Nine out of 29 economists polled by Reuters expect 2 votes for cut Thursday

• Ramsden most likely to join Dhingra in voting for cut. 5-4 for cut in June?

• 1.2530 (May 3 low) is now a GBP/USD resistance level. 1.2500 expiry today

• Had seen bearish risk Tues and market has slipped lower

• GBP/USD long upper candle shadows highlight demand fade nL1N3HA0I4

• A bearish engulfing line Tues and GBP set for back to back down days

• The reversal signal will need confirmation

• A 38.2% Fibo off 1.2299-1.2569 provides a bear target at 1.2466

• The Fibo close to the 1.2467 May 1 low point

• Key 50% retracement is 1.2434, a break here could cement the new bear trend

• We will look for an opportunity to get short for drop under 1.2400

  For more click on FXBUZ

• Off 0.2% at the base of a 1.2484-1.2518 range with consistent flow on D3

• The U.S. dollar showed broad-based strength with firmer UST yields

• There is no UK data today, so risk appetite and the USD will lead sterling

• GBP likely quiet ahead of the BoE rate decision and outlook on Thursday

• Gilt yield fell on Tuesday suggesting markets are looking for a dovish shift

• Charts; 5, 10 & 21-DMAs plus daily momentum studies conflict - no real bias

• Resistance starts at Tuesday's 1.2568 top then at Friday's 1.2634 high

• The 1.2484 21-DMA and last week's 1.2467 base are the initial supports

For more click on FXBUZ

Synopsis:

Société Générale assesses the impact of the Reserve Bank of Australia's (RBA) latest policy decisions on the AUD/USD exchange rate, emphasizing the Federal Reserve's more significant role in influencing the currency pair's movements.

Key Points:

• RBA's Limited Influence: The recent RBA meeting highlights its limited impact on the AUD/USD, with the currency's future largely tethered to actions taken by the U.S. Federal Reserve.
• AUD/USD Trading Range: The AUD/USD has been confined within a USD 0.63-0.69 range over the past year, closely mirroring a stable 5-year yield differential between the U.S. and Australia.
• Yield Differential Significance: Significant shifts in AUD/USD are contingent on the yield differentials; a move towards AUD/USD 0.7 would require Australian yields to exceed those in the U.S., whereas a potential dip below 0.60 would need U.S. yields to be over 1% higher than Australian yields.
• External Economic Factors: A sluggish recovery in China and subdued Australian export prices provide little domestic support for the Australian dollar, placing greater emphasis on U.S. economic policies and the Fed's decisions.

Conclusion:

While SocGen maintains a positive long-term outlook on the Australian dollar, they underscore that its near-term fate is more closely tied to U.S. monetary policy rather than domestic factors. With the AUD/USD currently stuck in a narrow range, investors and traders are advised to keep a close eye on Fed actions and broader U.S. economic indicators.

• Off 0.15% as USD/JPY +0.3%, AUD -0.4% leads the USD higher -EUR/JPY up 0.15%

• BOJ's Ueda signals chance of policy action if yen moves affect inflation

• USD gaining broad support from Fed expecting yields to be higher for longer

• ECB to cut rates in June, ECBWATCH prices another in September or October

• Central banks will be data-driven, but sentiment and yields support the USD

• Charts - 5, 10, and 21 DMAs and momentum studies conflict - no strong bias

• 1.0888 upper 21-day Bolli band and last week's 1.0812 high key resistance

• Friday's 1.0724 base and then Thursday's 1.0675 low are initial supports

For more click on FXBUZ

• Off 0.15 extending Tuesday's 0.41% fall as markets price earlier rate cuts

• Yield spreads widened, 10yr gilt fell 10bp to 4.129%, 10yr UST -2bp 4.461%

• BOEWATCH priced 24.32pts of cuts in August from 22.96 at Friday's close

• Markets are betting on a more dovish tone from the BoE on Thursday May 9

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

• 21-day Bollinger bands contract - the daily charts show no strong bias

• Resistance starts at yesterday's 1.2568 top then at Friday's 1.2634 high

• The 1.2484 21-DMA and last week's 1.2467 base are the first supports

For more click on FXBUZ

• Trades down 0.06% after closing off 0.13% with the US dollar up 0.27%

• Mixed German data as exports rebounded but industrial orders disappointed

• EU needs a strong German economy - yield expectations lead EUR/USD

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

• 21-day Bollinger bands contract - the bounce has stalled, no strong bias

• 1.0889 upper 21-day Bolli band and last week's 1.0812 high key resistance

• Friday's 1.0724 base and then Thursday's 1.0675 low are initial supports

• 1.0750 962mln and 1.0775/80 726mln are the close strikes for May 8th

For more click on FXBUZ

• AUD/USD opens 0.4% lower as RBA refrains from reverting to tightening bias

• C.bank not ruling anything in or out on rates but vigilant on price risks

• Keeps door ajar for rate hike but hawks disappointed with unchanged stance

• Traders slash bets of another hike this year; AU 10-yr yield falls 11 bps

• RBA's higher-for-longer rate stance least dovish of major central banks

• AUD likely to remain bid on dips as a result; Tue global range 0.6649-0.6587

• Resistance 0.6625-30, 0.6645-50, support 0.6580-85, 0.6540-50

• For more click on FXBUZ

Synopsis:

MUFG analyzes the reaction of the Australian dollar and market expectations following the Reserve Bank of Australia's (RBA) less hawkish than anticipated policy update during this week's May meeting.

Key Points:

• AUD Movement: The Australian dollar registered significant movements, weakening in the Asian trading session, largely influenced by the RBA's latest policy update.
• Market Expectations: Prior to the meeting, Australian rate markets had largely priced out rate cuts for the year and began to anticipate potential rate hikes, evidenced by a notable increase in the implied yield on December 2024 three-month interest rate futures.
• RBA Policy Signal: Contrary to market expectations for a more hawkish stance, the RBA's updated policy statement was less assertive about imminent rate hikes, leading to a recalibration of market expectations and a subsequent decrease in short-term rates by approximately 8bps.
• Inflation Outlook: The RBA noted that inflation appears to be declining more slowly than previously projected, acknowledging ongoing economic pressures.

Conclusion:

The RBA's May meeting has adjusted market perspectives on the future direction of Australian monetary policy, signaling a more cautious approach than many anticipated. This shift has implications for the Australian dollar and could influence investor strategies concerning Australian assets, particularly as the market digests the slower than expected decline in inflation.

• USD/JPY rose 0.5% and could test hurdles in the 155.00-50 range

• Prices trying to post a close above the 21-DMA at 154.63 on Tuesday

• Rebound fueled by 2nd chance to buy 152 breakout after weak NFP, ISM Friday

• The 38.2% & 50% Fibos of last week's 160.245-151.86 dive are at 155.06/6.05

• The 10-DMA and kijun are at 155.33/53, and the tenkan is at 156.05 on EBS

• The bulk of this & next week's upper option expiries are at 155.00-50

• Longs taking on risk of more suspected MoF yen buying, but BoJ still in QE

• Key from here are US CPI and retail sales on May 15, bullish contrast key

For more click on FXBUZ

• GBP$ slips into NorAm close, -0.31% at 1.2523; Tuesday range 1.2569-1.2511

• Pair dips below Fri's flash low at 1.2530, finds supt ahead of 21-DMA 1.2504

• Below 1.2504 the May 1 low at 1.2467 and April 26 low at 1.2449 targeted

• Res at 1.2546 the 200-DMA, 1.2569 Tues high, 1.2593 Monday high

• Sterling bulls beware the BoE nL1N3HA1ST

• Longs cautious pre-BoE Thurs; BoE to hold, presser in focus for policy view

• Polling indicates growing expectations of more dovish BoE policy

• IRPR shows more than 40% odds for June hike, -52bp by Dec 19 BoE meeting

• AUD$ limping out of NorAm session -0.41% at 0.6598; Tues range 0.6649-0.6587

• Pair moved steadily lower after dovish RBA rate hold; Fri high 0.6650 caps

• RBA not prepared to hike, wary high prices, policy path seen steady in 2024

• AUD/USD-Stumbles at familiar hurdle, RBA sticks to neutral tone nL1N3HA1C3

• Supt at Tues low 0.6587, falling 100-DMA at 0.6581, 10-DMA 0.6551

• Bears in control abv 0.6506, 50% of 0.6363-0.6650; sub-May 10.6466 in view

• Res 0.6650 Friday pre-payroll high, Mar 8 high 0.6667, 0.6703 Jan 15 high

• For more click on FXBUZ

Synopsis:

Danske Bank has updated its forecast on the Federal Reserve's interest rate actions for 2024, now expecting fewer rate cuts than previously anticipated. This revision follows recent public statements by Fed officials and a series of economic data releases.

Key Points:

• Rate Cut Forecast: Danske now predicts the Fed will implement rate cuts only twice this year, specifically in September and December. This is a reduction from their earlier forecast of three cuts throughout the year.
• Rationale Behind Revision: The adjustment is based on stronger-than-expected structural growth in the U.S. economy and persistent inflation pressures outside of the housing sector.
• Economic Indicators: Recent labor market data suggests the U.S. economy is gradually moving towards broader disinflation, supporting the case for eventual rate cuts.
• Outlook: Although the forecast has been revised to fewer cuts, Danske maintains that risks are skewed towards more cuts rather than fewer in 2024, citing ongoing but slow economic cooling.

Conclusion:

Danske Bank’s revised forecast aligns with a cautiously optimistic view on the U.S. economy’s resilience. While acknowledging the potential for further rate cuts due to underlying economic trends, the update suggests a more gradual approach to monetary easing by the Fed. Investors and policymakers will likely continue to monitor incoming data closely, especially regarding non-housing inflation and overall economic momentum, to gauge the appropriate timing and extent of future rate adjustments.

With both the Fed decision and U.S. payrolls data in the rear-view mirror, which has ultimately taken the shine off the dollar, EUR/USD has grinded higher and is now eyeing a test of its 200-DMA (1.0796).

Treasury yields have continued their descent, the benchmark 10-year now yielding 4.42% and thus, dollar upside is likely to be harder to come by in the near-term.
As a result, there is a window of opportunity for EUR/USD bulls, though, a close above the 200-DMA will be needed to exacerbate topside momentum.

For now, given the recent run of soft data, the U.S. exceptionalism narrative has waned, as indicated by the U.S. Citi Surprise Index – the difference between the actual release and economic forecasts – hovering at its the lowest level since early 2023.
In turn, there is room for traders to trim stale dollar longs, which have become crowded.

Looking ahead, with little in the way of notable data until the May 15 U.S. CPI release, price action is likely to be somewhat contained.

For more click on FXBUZ

Synopsis:

Goldman Sachs provides insights into the dynamics influencing the USD/JPY currency pair, highlighting the potential for continued upside despite recent interventions by Japan.

Key Points:

• Forex Interventions' Limited Impact: Goldman Sachs notes that Japan's recent interventions in the forex market, primarily funded through cash deposits, have had minimal impact on other asset classes, such as Treasuries, suggesting a limited broader market disruption.
• USD/JPY Upside Potential: The firm believes that the current downward-sloping forwards in the USD/JPY pair will not align with future realizations, indicating potential for further upside.
• Regional Stability and CNY Influence: The interventions are seen as a stabilizing factor for the region, particularly easing pressure on the Chinese Yuan (CNY) trade-weighted index (TWI) in the near term.
• Global Policy Response to a Resilient Dollar: These interventions are part of a broader global response to a resilient U.S. Dollar, contributing to maintaining relatively low FX volatility.

Conclusion:

Goldman Sachs maintains a positive outlook on the potential for further appreciation in the USD/JPY currency pair. The interventions by Japan are viewed as an isolated stabilizing attempt that reinforces a global trend of managing currency fluctuations against a strong U.S. Dollar, suggesting continued investment opportunities in the pair's upside movements.

• 1.2562 is high water-mark for cable since its Ldn am drop to test 1.2530

• Offers expected pre-1.26 if ascent extends: 1.2593 was Monday's high

• BoE rate decision Thursday: Will Ramsden join Dhingra in voting for a cut?

• Markets currently see 46% chance of BoE rate cut in June0#BOEWATCH

• Technical fault delays BoE weekly indexed repo until Wednesday nL8N3HA3ZP

• UK's Labour Party says Tory PM Sunak is out of touch on economy nL1N3HA1AY

Synopsis:

Bank of America discusses the growing importance of hedging against USD appreciation risks for US corporations in 2024, highlighting a significant USD rally and potential disruptive market scenarios.

Key Points:

• USD Strength Impact: Reminiscent of 2022, a more than 3% rally in the USD in 2024 has started to pressure the bottom lines of US corporates, reflecting the impact of a strong home currency on international revenues.
• Market Signals and Forecasts: Short-term quantitative signals suggest that the USD uptrend against G10 currencies remains intact. However, the path to anticipated USD weakness is increasingly uncertain and complex.
• Drivers of USD Rally: The rally has so far been supported by robust US economic performance and attractive yield differentials with G10 peers. Yet, there's a risk that the bullish trend could amplify if triggered by risk-off shocks, further boosting demand for the USD as a safe haven.
• Hedging Recommendations: Given the uncertain outlook and potential for volatility, BofA advises US corporates to consider hedging their exposure to USD appreciation, particularly against the EUR, JPY, CHF, and CAD. This recommendation is based on the current levels of forward premiums and the recent trends in spot currency movements.

Conclusion:

As 2024 progresses, US corporations are advised to be vigilant and proactive in managing currency exposure. Hedging strategies against USD appreciation could safeguard against potential disruptions to financial performance, providing stability in a time of currency volatility and market shifts.

Synopsis:

ANZ presents a nuanced perspective on the Australian Dollar, expressing a cautious stance on AUD/USD due to stronger USD forecasts and mixed domestic signals, while forecasting strength in AUD/NZD based on favorable comparative economic fundamentals.

Key Points:

• AUD/USD Caution: ANZ anticipates a stronger USD in the near term, coupled with ambiguous signals from Australia's economic data, leading to a cautious outlook for AUD/USD.
• AUD/NZD Optimism: The cross reached a year-to-date high on May 2, 2023, and is expected to find support at these levels. Predictions of relative economic strength in Australia compared to New Zealand bolster this outlook.
• Year-End Targets: ANZ projects AUD/NZD to hit 1.11 by the end of the year, driven by a forecasted 5% appreciation of AUD/USD and a more modest 3% increase in NZD/USD.

Conclusion:

While the broader strength of the USD may dampen prospects for AUD/USD, the comparative economic robustness of Australia vis-à-vis New Zealand offers a bullish case for AUD/NZD, making it a potentially favorable position through the end of the year.

• Cable elicits support at 1.2530 after falling from 1.2593 (Monday's high)

• 1.2530 was Friday's low (after jump to 1.2634). More bids expected by 1.2500

• There are 1.2500 option expiries for the 10am ET NY cut today and Wednesday

• BoE event risk Thursday; BofA, SocGen, Danske Bank predict 7-2 MPC hold vote

• UK construction PMI 53.0 vs 50.2 f/c. UK house prices inch up, Halifax says

• CFTC data showed net GBP short rose to 28,990 contracts in week to April 30

• USD/JPY has risen from 153.88 to 154.65, on Tuesday, EBS data shows

• 4th weekly close in a row above long-term 152.60 Fibo bullish nL1N3H92TW

• Huge rate differential between Fed and BOJ continue to underpin spot

• However, Japan warns of action over rapid currency moves nL1N3H9310

• Ueda: Bank of Japan to scrutinise yen moves in guiding policy nL4N3HA2LW

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

• AUD/USD falls to 0.6587 after RBA maintains neutral stance on interest rates

• 0.6649 was Asian session high, pre-RBA, on expectations of a hawkish hold

• Asia high was pip shy of Friday's eight-week peak (scaled on US data misses)

• 0.6587 is lowest level since Friday (0.6587 was also April 29 high)

• CFTC data showed net AUD short fell 13% to 83,235 contracts at end-April

• Australian PM Albanese says China military air incident unacceptable

• Traders are betting $0.9 billion that EUR/USD drops

• Bearish bet is small but traders have bought over $17 billion this year

• The unwinding of a large bullish bet hasn't changed EUR/USD much

• Pair traded 1.0877 EBS low on Jan 5 - now 1.0764

• Daily chart has just recorded a golden cross - 55-DMA rising above 200-DMA

• Bullish techs may couple with rising expectations for U.S. easing cycle

• Spec positions currently represent little restraint any EUR/USD rise

• Potential targets: 1.0825, 1.0886 and 1.1062