• GBP$ soft in NorAm afternoon trade, -0.15% at 1.3425; NorAm range 1.3459-1.3417

• USD broadly higher but remains w/in recent ranges as US inflation fears ramp up

• Mideast moving toward peace; Sec of State Rubio says progress on peace being made

• Oil slides on peace prospects, Brent/WTI down more than 4% on pot'l openning of Hormuz

• UK data dearth rest of wk, traders will focus on US jobless claims, PCE prc Idx on Thursday

• GBP$ Supt 1.3417 Wed low, 1.3407 daily conversion line, 1.3360 lower 30-d Bolli

• Res 1.3458 Wednesday high, 1.3481- 50% Fib of 1.3658-1.3304, 1.3509 daily high May 25

GBP Chart:


(Paul Spirgel is a Reuters market analyst. The views expressed are his own)

Societe Generale Research flags a scope for further correction in AUD/NZD.

"Rate differentials have been rising in favour of the AUD relative to the NZD since April 2023, when NZD 2-year rates were 166bp higher than AUD ones, and AUD/NZD was at 1.06. The rate differential peaked when AUD rates reached 160bp over NZD ones, at the end of March. It’s 30bp off the highs now and the RBNZ’s ‘hawkish hold’ at today’s monetary policy meeting, combined with indications of a softening trend in Australian data that have seen expectations of further rate hikes fall away, beg the question of whether the divergence in RBA/RBNZ policy is now over and could reverse somewhat," SocGen notes.

"There are, of course, plenty of uncertainties still ahead, but the sheer extent of the AUD/NZD move gives it potential for a retracement. The last 12 months have delivered almost 17% in returns for long AUD/NZD and there’s clearly room for a correction if the relative outlook for monetary policy is changing," SocGen adds.

• EUR/USD remains in a state of inertia as ranges compress. Daily range = 1.1623-62

• Geopolitical headlines keep markets in a chop, but bias still tilts towards a deal

• EUR bulls struggle for traction with spot holding below the 200DMA (1.1682)

• Bearish bias intact sub-200DMA will persist as long as spot trades sub-200DMA

• 1.16 support holding, but without a catalyst it is a floor by default

• Eyes on Thursday's U.S. Core PCE, risks skewed towards a topside surprise

• Hot print likely sees EUR retest 1.16
EURUSD daily chart


Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

Credit Agricole CIB Research discusses the scope for another wave of Japan's MoF intervention.

"USD/JPY is back above the key 159.00 level leaving the exchange rate open to further upside and therefore at risk of another wave of FX intervention. Japan’s Finance Minister Satsuki Katayama as well as US Treasury Secretary Scott Bessent both verbally intervened to support the JPY last week, but to little avail," CACIB notes.

"And while BoJ Board and committee members have been switching to supporting another rate hike in June, this is offering little to support to the JPY for several reasons: (1) the market is already 80% priced for a June rate hike; (2) the shift in BoJ pricing has not been as dramatic as the shift in pricing for the Fed or other G10 central banks; and (3) oil prices remain elevated and a drag on Japan’s terms of trade. It would take a hawkish hike by the BoJ in June and/or significantly weaker oil prices to improve the JPY’s prospects. A hawkish hike would be very uncharacteristic of the BoJ," CACIB adds.

• $CAD slow drift higher continues, +0.15% at 1.3834; Wednesday range 1.3839-1.3804

• Diminishing Mideast conflict angst and diverging Fed-BoC rate expectations lift USD

• Long-term US, CA yields are a touch lower; LSEG's IRPR shows US-CA ST rates converging

• Per IRPR, Fed seen hiking 17bp by Dec meeting, BoC +34bp down from abv 50bp 2-wks ago

• $CAD res 1.3839 Wednesday high, 1.3857 rising upper 21-d Bolli, 1.39 psychological lvl

• Supt 1.3804 Wed low, 1.3777 daily cloud top, 1.3723 flat 100-DMA

CAD Chart:


(Paul Spirgel is a Reuters market analyst. The views expressed are his own)

Bank of America Global Research flags a scope for a sizeable reversal in AUD/NZD on widening tax differentials between Australia and New Zealand.

"We have been bullish AUD/NZD for most of the past 3 years, but we are becoming more cautious and note the potential downside if widening tax differentials lead to a meaningful shift in trans-Tasman migration patterns...," BofA notes.

"Over the longer run, we think the migration channel is becoming more important and may at least partly offset other drivers. New Zealand's tax system stands out globally for its absence of a broad-based capital gains tax, meaning most asset appreciation is not taxed, aside from targeted rules, such as the bright-line test for property or cases where assets are acquired with intent to resell. 

In contrast, Australia taxes capital gains as part of income and is now moving towards tighter treatment, including a minimum tax on gains and reduced concessions. The net result is a growing wedge between after-tax returns on capital across the Tasman," BofA adds.

Goldman Sachs flags a scope for an extended reversal in AUD/NZD along with further spike in NZD/USD. 

"AUD/NZD on the move lower overnight with the combo of a more hawkish RBNZ coming at the same time as weaker flash CPI out of Australia. With a move from 1.0650 just over a year ago to above 1.2288 high overnight, the market now wary of a potential reversal in AUD/NZD alongside a number of other crosses within the G10 space," GS notes.

"Any reversal would more be led by the NZD side of the equation, with a large short position having built up over the past few months and a path to a reversal likely to come from some kind of Iran deal and a broader USD sell off. We look for a break above 0.5891 (100dma) as the first level to put pressure on existing shorts in NZD," GS adds.

• AUD/NZD longs unwind after hawkish RBNZ hold - 3-3 vote split, RBNZ Governor casts deciding vote

• AU monthly CPI miss also piling on the pressure - largest one day drop since Nov 2019

• Cross now sitting on the 55DMA cluster (1.2100-22). The level has been the backbone of the trend

• Critical to hold as a daily close below the cluster likely changes the narrative, opens door to deeper setback

• Positioning is also a risk, crowded long base means the washout can be disorderly if 1.21 gives way cleanly
AUDNZD daily chart


FX positioning


Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

• Lower than expected headline Australia inflation leaning on the Aussie

• Govt tax cuts on fuel impacting CPI: core CPI ticked higher on higher oil prices

• Softer headline infl and a surprise jump in the jobless rate, a 4 1/2 year high

• RBA could be justified in moving away from its hiking stance

• Market is still looking for one more hike to 4.6% but could be more balanced

• AUD/USD topped out at 0.7182 Mon, slipped Tues and drops to 0.7136 Wed

• Range top now defined by the 20-day moving average, today at 0.7187

• Converged 50-day moving average and the lower 20-day Bollinger: 0.7102-0.7103
AUD/USD daily chart:


(Peter Stoneham is a Reuters market analyst. The views expressed are his own)

• Cable capped at 1.35, bull conviction still lacking

• Ofgem confirms energy price cap rise of 13% from July - stagflationary headwind

• EUR/GBP demand adding cross-driven pressure on cable

• Watch the 200DMA cluster (1.3410-23), this is the near-term line in the sand

• Clean break below the cluster opens 1.33 as the next meaningful level

• Today is corporate month-end, potential for mechanical flow-driven USD buying

• Bias still leans towards this choppy price action persisting
GBPUSD daily chart


Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

• EUR/USD remains trapped between key technical levels and a plethora of huge FX option strikes

• Bulls need a close above 55-dma 1.1647, but more importantly the 200-dma 1.1682

• 1.1668-1.1700 daily cloud adds resistance. Support 26, 22, 21 May lows 1.1617, 1.1589, 1.1577

• Hedging of huge soon-to-expire FX option strikes also strangling FX spot price of late

• 5-billion euros of strikes between 1.1600-50 expire 10-am New York/14:00 GMT Wednesday

• Lack of spot volatility has pressed FX option implied volatility levels to pre Mid-East conflict lows

• Related comment - Morgan Stanley urges investors to fade any dollar recovery
EUR=EBS


(Richard Pace is a Reuters market analyst. The views expressed are his own)

• Intervention threat and FX option long gamma positioning has been helping to contain USD/JPY spot

• Much of that long gamma is derived from exotic option positions - like barriers/triggers at/above 160.00

• Dealers say many of these options are due to expire over the next week and could loosen USD/JPY's shackles

• The recent volatility drought has helped to reduce FX option volatility premiums to 4-year lows

• However, post June 3 options attracting buyers - BoJ Gov Ueda due to speak - market looking for any policy signals
Benchmark 1-month expiry FXO implied volatility


(Richard Pace is a Reuters market analyst. The views expressed are his own)

• Sub 3-month expiry USD/JPY FX implied volatility breaks pre intervention levels from late April for new 4-year lows

• Implied volatility gauges current and expected realised volatility so no surprise to see it so low with spot glued near 159.00

• Other currency pairs are also subjected to low realised volatility which continues to pressure option prices

• Most of the FX option implied volatility levels in the G10 FX majors are at, or near to pre Mid-East conflict lows

• Without a renewed volatility catalyst, FX option implied volatility looks set to stay lower for longer
Benchmark 1-month expiry FXO implied volatility


(Richard Pace is a Reuters market analyst. The views expressed are his own)

• FX options expire at 10am New York/15:00 GMT on Wednesday May 27

• EUR/USD: 1.1600 (906M), 1.1615-25 (787M), 1.1630-40 (1.5BLN), 1.1650-60 (1.9BLN), 1.1670-75 (547M), 1.1700 (1.4BLN)

• USD/CHF: 0.7905 (321M). EUR/CHF: 0.9225 (150M)

• EUR/GBP: 0.8660-65 (375M), 0.8675-80 (590M)

• GBP/USD: 1.3390 (215M), 1.3450 (235M), 1.3475 (194M), 1.3495-1.3500 (485M), 1.3530-40 (843M)

• AUD/USD: 0.7150 (451M), 0.7170-80 (700M), 0.7185-90 (923M), 0.7200 (1BLN)

• NZD/USD: 0.5875 (243M). AUD/NZD: 1.2100 (212M). USD/CAD: 1.3805 (327M)

• USD/JPY: 158.80-85 (1.9BLN), 159.00 (1.3BLN), 160.00 (942M), 161.00 (2.4BLN)(Richard Pace is a Reuters market analyst. The views expressed are his own)

• GBP/USD steady in Asia after closing 0.43% lower Tue as Iran deal elusive

• Iran says new US strikes violate ceasefire; chances of near-term deal fade

• Risk rally, lower oil and U.S. yields likely to limit downside

• U.S. 10-year yield -1.5 bps in Asia after falling 8 bps Tue; WTI crude -1.2%

• Support 1.3435-40, 1.3410-15, resistance 1.3480, 1.3500-05

• Tuesday range 1.34345-1.35045, Asia 1.3447-1.34585
UK consumer sentiment has fallen most in G7:

(Krishna Kumar is a Reuters market analyst. The views expressed are his own.)

• NZD/USD +0.6% Wed after RBNZ holds OCR steady at 2.25% as anticipated

• RBNZ Breman decides outcome after vote split 50-50

• RBNZ sees OCR higher sooner and by more than envisaged in Feb

• U.S.-Iran ceasefire at risk as latest U.S. strikes draw retaliation threats

• Brent crude softens slightly in Asia but remains elevated near $100 a barrel

• NZD stays above 0.5815 support, break below will hasten move towards 0.5680

• Range NZ 0.5835-765, support 0.5815 0.5680, resistance 0.5991 0.6012
NZD Hourly Bollinger Study & DXY Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• AUD/USD -0.1% Wed after AU inflation rises less than expected in Apr

• AUD Apr monthly CPI +0.4% m/m (poll +0.6%), +4.2% y/y (poll +4.4%)

• U.S.-Iran peace negotiations at risk following latest U.S. strikes

• Iran threatens retaliation, Brent crude softens but stays near $100 a barrel

• AUD resistance forming near 0.7185, new impetus needed to avert downside run

• AU Q1 capital expenditure due Thur, Reuters poll consensus +1.0% q/q

• Range Asia 0.71565-79, support 0.7080 0.6834, resistance 0.7185 0.7283
AUD Hourly Bollinger Study & DXY Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• USD/JPY back on 159 handle on US-Iran impasse, reports of incidents

• Asia 159.20-29 EBS so far after push up to 159.38 yesterday

• Market still likely capped ahead of 160 on Japan FX intervention threat

• Central bank comments out of Tokyo also in focus, BOJ likely hawkish

• USD/JPY daily Ichimoku cloud between 156.37-158.85 supportive still

• Spot also has cleared hourly Ichimoku cloud between 158.89-99

• 100-HMA 159.05 above cloud, 200-HMA 158.94 in cloud

• Option expiries today more supportive than not today

• Below between 158.70-99 $2.8 bln, 159.00-10 $1.7 bln, above 160.00 $942 mln

• Massive $2.4 bln however at 161.00 strike today

• No real change in JGB-US Treasury rate differentials

• Differential in 2s still on wide side at @265 bps, 10s narrow @178 bps

• Related comments , , , also

• US markets , ,

• On Middle East , ,

• Also on US bonds , poll on Nikkei
USD/JPY:


USD/JPY nearby option expiries this week:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

• AUD/USD +0.5% wtd in tentative trading as important inflation update looms

• AUD Apr monthly CPI 0130 GMT, Reuters poll consensus +0.6% m/m, +4.40% y/y

• Iran says latest U.S. strikes violate ceasefire, threatens retaliation

• Brent crude +3.4%, nears $100 a barrel on undermined Middle East peace hopes

• AUD resistance forming near 0.7185, fresh catalyst needed to avert slide

• AU Q1 capital expenditure due Thur, Reuters poll consensus +1.0% q/q

• Overnight range 0.7155-76, support 0.7080 0.6834, resistance 0.7185 0.7283
AUD Daily 55-DMA


AUD Weekly 52-WMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

JP Morgan Research shifts to a neutral bias on GBP over the medium-term.

"Turned neutral as solid carry and positive data surprises offset near-term political risks, leaving nearterm targets unchanged. Maintain upward-sloping EUR/ GBP trajectory given fiscal risks around the budget and leadership challenge outcome later in the year," JPM notes.

"EUR/GBP unchanged (2Q 0.87, 4Q 0.89), but GBP/USD lowered mechanically on EUR/USD revisions; 2Q 1.34 (unchanged), 4Q 1.28 (1.35)," JPM adds.

• EUR/USD rallied to 1.1645 in Europe's morning & just ahead of NY's open

• Sellers emerged in NY as USD buying intensified & oil

traded up

• USD/CNH turned positive & gold, silver traded down to reinforce the USD buying

• US yields firmed up a bit which added some buoyancy to the USD

• EUR/USD fell to 1.1617 then bounced a bit, sat near 1.1625 late, was down -0.17%

• Techs lean bearish; RSIs are falling & pair is below 10-, 21-, 55- & 200-DMAs

• Potential head and shoulder top on monthly chart adds to bearish sentiment
eurusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

(Adds headline)

• NY opened near 0.7165 after 0.7155 traded overnight, pair rallied early

• USD, US yields traded softly, helped AUD/USD hit 0.7176

• Equity gains & USD/CNH drop helped underpin the pair's rally

• Sellers emerged however as USD firmed up & yields moved upward

• Gold and silver traded down, USD/CNH turned up & stocks eroded some gains

• AUD/USD neared 0.7160 late in the day, the pair traded down -0.17% in NY's afternoon

• Falling RSIS, pair's hold below the 10- & 21-DMAs are bearish tech signals
audusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

Bank of America Global Research previews the interim assessment of the JGB purchase reduction plan at the June MPM.

"We expect the Bank of Japan to maintain the current reduction plan through Q1 2027. Our base case is that monthly purchases to be held at around ¥2.1tn from April 2027 onward. Given the recent rise in yields and volatility, we think the BoJ will prioritize avoiding the risk of a further JGB selloff and providing opportunities for market participants to sell low-liquidity issues to the Bank, rather than continuing monthly reductions," BofA notes.

"Notably, even if purchases are held unchanged at ¥2.1tn from April 2027, the BoJ's balance sheet is still expected to shrink," BofA adds.

• Ether rallied above the falling 10-DMA over weekend trading as well as today

• The rallies were rejected and Ether fell back below the 10-DMA

• Today Ether erased all early gains and turned lower, a daily inverted hammer formed

• Ether now sits slightly below the base of the bear pennant on daily charts

• A monthly inverted hammer and consolidation of drop form Jan. high add to bear signs

• Falling daily, monthly RSIs are not oversold which indicates downward momentum

• A sustained hold below the pennant base could lead to intensified selling of Ether

• Tests of the February monthly low & 2025 yearly low may then follow
eth


(Christopher Romano is a Reuters market analyst. The views expressed are his own)