Danske Research likes short USD/JPY exposure and looks to sell EUR/USD on recent rallies.

"The broader risk-on sentiment in markets yesterday contributed to lifting EUR/USD back to the 1.08 mark. Our near-term bias is for a slight further move higher in the cross even if we highlight that we will look to sell the rally on a medium- to long-term basis," Danske notes. 

 "Yesterday, rising US yields sent USD/JPY above the 131 mark. We still like being short USD/JPY and we think there is increasing evidence of persistent inflationary pressures in Japan making monetary policy tightening from the BoJ more probable, especially if banking sector concerns settles and a global economic slowdown is avoided," Danske adds. 

• AUD/USD fell sharply after rallying towards the 200-DMA last week

• The pair fell below the 10-DMA but couldn't get lower than 0.6625

• Today bulls have regained their footings & solid gains are in place

• AUD/UD traded above the 10- & 21-DMAs and daily RSI is now rising

• Monthly RSI falling a bit but a long legged monthly doji has formed

• Bulls gain confidence, break of 200-DMA, 0.6760/80 will reinforce it

• For more click on FXBUZ

MUFG Research sees a scope for GBP to stay supported over the coming weeks.

"The more resilient UK economy is keeping pressure on the BoE to tighten policy, and was one of the reasons why the BoE decided to hike rates by a further 25bps last week despite recent weaker than expected wage growth and inflation. In his first speech since last week’s MPC meeting, Governor Bailey provided reassurance that UK banks were “well placed” to support the economy while acknowledging “big strains” in parts of the global banking system," MUFG notes. 

"The comments leave open the possibility of one further 25bps hike at the next MPC meeting on 11th May. The UK rate market is currently priced at around 50:50 for another hike then," MUFG adds.

• EUR/GBP range trading persists, bears struggle to break 100DMA (0.8779)

• Close below 100DMA could open up a move towards 2023 lows at 0.8719/22

• April seasonality often bullish GBP and thus bearish EUR/GBP

• BoE's Bailey highlights that focus remains on fighting inflation

• Event risk to watch: UK Q4 GDP and Eurozone CPI scheduled Mar 31st

• For more click on FXBUZ

Credit Agricole CIB Research is bearish EUR/GBP over the coming weeks.

"While EUR/GBP continues to trade range-bound and seems unable to break below the 0.87 level, we think that the risks for the pair have shifted to the downside in recent weeks. According to our FAST FX model, which is based on short-term rate spread, peripheral yield spread to Bunds and a proxy for risk appetite among other drivers sold the overvalued EUR/GBP targeting a move towards a short-term fair value of 0.8670," CACIB notes. 

"Indeed, we think that the fundamental outlook for the EUR may have taken a turn for the worse.. In contrast, the UK outlook seems to be gradually improving following the ‘winter of discontent’, which saw the economy plagued by strikes, a cost of living crisis and persistent Brexit uncertainty," CACIB adds. 

Citi summarizes the signal output of its month-end fixing model. 

"The preliminary estimate of month-end FX hedge rebalancing flows points to moderate USD selling against all major currencies except EUR," Citi notes.

"Our real money client flows show some JPY and AUD buying in the most recent week, in line with the signal," Citi adds.

Month-end flows usually linked to the London Fix of the last trading day of the month, but its impact can be noticed into the last few days of the month. 

• USD/JPY fell from 131.54 to 130.51 on Tuesday, before bouncing in London

• Monday's 130.40 EBS low and Friday's 129.65 EBS low are both still intact

• Stocks rise after bank sale fuels investor risk appetite nL1N3600AV

• A rise in risk appetite will likely limit USD/JPY downside

• USD/JPY daily chart has three bullish signs, expect more gains nL1N3600FO

• The multi-week USD/JPY slide could well be over nL1N35Z0LW

• EUR/JPY's correlation with USD/JPY high, 30/60-day logs are both above +0.60

With the market's broader central bank focus shifting to rate reductions, the March 50-basis point rate hike from the European Central Bank (ECB) gave warning that European interest rates are not for turning.

Unless there is a marked deterioration in the banking sector and credit conditions tighten excessively there is a chance that ECB rates could hit a high point of 3.75% or at the very outside 4.0%.
The ECB is still fighting inflation and 25-basis point hikes at the May, June and July policy meetings shouldn't be ruled out.
It is possible that the first-rate reduction will not be seen until 2024.

Despite uncertainty surrounding the U.S. interest rate outlook there could be an argument for bringing down terminal rate forecasts.
If the domestic banking crisis escalates, the Fed might take a bigger step away from its more cautiously hawkish path.

Policy uncertainty, both ECB and Fed, will dampen down any developing trends but with the ECB in its pocket EUR/USD should go higher.

For more click on FXBUZ

• AUD/USD boosted by higher than f/c retail sales at 0.2% vs 0.1%

• Markets remain in favour of an RBA pause, but CPI will be key 0#RBAWATCH

• Hotter-than-expected CPI would likely boost AUD notably

• Long AUD is better expressed via AUD/NZD given narrowing rate differentials

• AUD/NZD support resides at 1.0674 (YTD low) and 1.0709 (200-Week MA)

• See comment: AUD sensitivity to data heightened ahead of RBA nL1N35Z19M

For more click on FXBUZ

Forward looking FX options saw plenty of action during the recent banking crisis, but familiar themes are back in play for EUR/USD as markets settle.

There was solid demand for EUR/USD implied volatility which raised the cost of options as the recent crisis evolved, so it's no surprise to see it falling as calm returns to markets.
The benchmark 1-month expiry implied volatility was around 8.0 in early March, it peaked at 10.8 and is currently 8.3.

Risk reversals saw a big spike in the long-standing implied volatility premium for EUR puts over calls (EUR/USD downside versus upside strikes) to levels above 1.0 from 0.35.
Although it's also falling from Friday's latest spike to 1.0, the pace is slower and can warn traders that option dealers aren't ruling out renewed EUR/USD losses and implied volatility gains.

Worth noting are outright EUR/USD options flows.
Volatility sellers are at the fore which is consistent with calmer climes in familiar ranges, but there's still a notable lack of directional trades, especially to the topside, which was warning EUR/USD bulls to tread carefully before Friday's spot setback.

For more click on FXBUZ

• Cable rises to 1.2327 following hawkish comments from BoE's Bailey on Monday

• BoE Governor says rate-setters can put inflation before bank worries

• 1.2327 is 14 pips shy of last Thursday's seven-week peak (BoE rate rise day)

• Money markets currently see 61% chance of another 25 bps BoE hike in May

• 0#BOEWATCH. UK March food prices up 15% YY - BRC data nL8N35Z2YK

• 1.2300 is now a GBP/USD support point (1.2289/94 = Friday/Monday highs)

• Break from a brief consolidation phase targets recent 1.2341 high

• Little key resistance until the 1.2447 Jan. 23 and 2023 high

• Rising 10DMA provides support at 1.2222

• March 24 1.2192 low seen pivotal for the up-move

• Break below could negate bull run and open up the daily cloud, 1.2135-45

• Daily momentum is with the bulls and RSI is rising

  For more click on FXBUZ

• EUR/USD opened +0.30% at 1.0800 as banking turmoil calmed down

• After trading at 1.0798 it gradually lifted as USD eased across the board

• The 2-year US yield eased from 3.99% to 3.92% to add weight on the USD

• EUR/USD lagged, as the USD move lower was led by the USD/JPY nL1N360036

• EUR/USD traded to 1.0819 before settling around 1.0815

• Resistance is @ March 23 high @ 1.0930 and break targets trend high @ 1.1034

• Support is at the 10-day MA at 1.0740 and the 21-day MA at 1.0682

• Market still glued to developments in the banking sector

• EUR/USD likely to be supported while bank fears abaote

• For more click on FXBUZ

• AUD/USD opened +0.12% at 0.6651 after a relief rally in banks underpinned

• Mood in Asia was buoyant and AUD/USD tracked higher through the morning

• Aus retail sales came in slightly better and AUD/USD moved above 0.6660 nL1N36004Z

• USD/JPY led the USD lower late morning when the 2-year US yield edged lower

• The 2-year yield eased from the NY close at 3.99% to 3.92%

• AUD/USD broke resistance around 0.6670 and traded to 0.6690 as shots covered

• Heading into the afternoon it is trading around 0.6685/90

• The 10 & 21-day MAs converge around 0.6670 and is a pivot point for AUD/USD

• Key resistance is at the 200-day MA at 0.6755 with sellers above 0.6700

• Bias is for higher while the mood in the banking sector remains calm

• For more click on FXBUZ

Credit Agricole CIB Research see limited scope for further EUR/USD upside in the near-term.

After initiating in the US and spreading to Switzerland, banking turmoil finally hit the Eurozone at the end of last week, which subsequently sent the EUR reeling against other FX majors. Moreover, evidence later this week that the Eurozone inflation has eased more meaningfully in March could lead to further reassessment of the prospect for further aggressive monetary tightening," CACIB notes.

"In all, in the near-term, we think that the EUR could continue to struggle to perform. We further note that the steady build-up of EUR longs in recent weeks could further stand in the way of a durable rebound and leave the single currency vulnerable to bouts of profit taking," CACIB adds. 

• EUR/USD comfortably above 1.0800 as USD easing across the board in Asia

• USD/JPY leading the way, as US yields slipping lower after rising on Monday

• The 2-year US yield eased below 3.90% after closing US session at 3.997%

• It has moved back to0 3.93% as choppy trading continues

• EUR/USD resistance is at Friday's 1.0839 high and March 23 high at 1.0930

• For more click on FXBUZ

• GBP/USD up 0.2% in Asia on hawkish comments from BoE Governor Bailey Mon

• BoE's Bailey says rate-setters can put inflation before bank worries

• Says further monetary tightening would be required if inflation persistent

• Pushes back on view c.banks should heed banking turmoil when setting rates

• Sterling supported by mildly positive risk sentiment as banking fears ease

• British retailers report 1st positive sales expectations in 7 months

• Adds to other recent signs of recovery in economy, supports GBP

• Resistance 1.2335-40, 1.2400-05, support 1.2240-50; Asia range 1.2287-1.2315

• For more click on FXBUZ

• Aus Feb retail sales slightly better than expected at +0.1% M/M nAZN14RKQE

• AUD/USD was already trading at 0.6660 - up from the NY close at 0.6651

• It is currently trading above 0.6665

• Mood in Asia buoyant after stress in banking sector eased since Friday

• E-minis ate up 0.11% and Australia ASX 200 up over 1.0%

• AUD/USD resistance is around 0.6670 where the 10 & 21-day MAs converge

• A break above 0.6675 could increase upward pressure

• Key resistance is at the 200-day MA at 0.6755

• For more click on FXBUZ

• EUR/USD opens +0.35% after relief rally in bank shares underpinned nL1N35Z2EL

• EUR/USD move higher helped by a 1.0% rally in EUR/JPY nL1N35Z1UR

• Higher US yields helped to cap the EUR/USD around the 1.0800 level for now nL1N35Z1ZN

• EUR/USD support is at the 10-day MA at 1.0740 - where bids are tipped

• Resistance is at the March 23 high at 1.0930

• Sentiment has improved, but analysts warn banking stress may re-emerge nL8N35W4QG

• Key in Asia will be EUR/JPYflows out of Tokyo after the 1.0% rise

• For more click on FXBUZ

• AUD/USD opens +0.12% after getting only a slight boost from easing bank stress nL1N35Z2EL

• AUD/JPY rose 0.75% to underpin AUD/USD - while higher US yields capped nL1N35Z1ZN

• Failure to make strong gain from better risk environment discouraging bulls

• AUD/USD closed below the 10-day MA at 0.6668 - which is closest resistance

• Buyers tipped around 0.6625 with support at trend low at 0.6564

• Key resistance is at the 200-day MA at 0.6755 and break would be bullish

• Key today will be AUD/JPY flows ad reaction to Aus retail sales

• Feb retail sales expected to come in at +0.1% M/M after +1.9% In Jan

• For more click on FXBUZ

Danske Research maintains a bullish bias on the JPY in Q2.

"Recent data for CPI and wage negotiations suggest increasing evidence of more broad-based inflationary pressures in Japan. We stick to our call of monetary policy tightening from the BoJ in Q2 – most likely by tweaks or an abandonment of the yield curve control (YCC)," Danske notes. 

"We expect the USD/JPY to trade towards 125 during Q2. Risks to persistent inflation in Japan are a global economic slowdown, additional turmoil in the banking sector and falling energy prices," Danske adds. 

• USD/JPY rose roughly 0.76% into key resistance at 131.72-80 on risk rebound

• SVB asset sales to First Citizens added to the rebound begun on Friday

• Rebound from Fri's 129.645 EBS low hit dn TL and twin Fibo hurdles by 131.75

• Modest dip from there caught by Fed's Barr comments lifting risk and rates

• A close above the 200-HMA, now by 131.80, could bring 132.37/133 tests next

• WTI's $5-plus rise also bullish as US is an exporter & Japan an importer

• Bounce in stocks AND Tsy yields keeps haven yen on back foot

For more click on FXBUZ

The dollar index weakened slightly on Monday while the yen tumbled as safe-haven forex fell out of favor after First Citizens BancShares' deal to buy failed peer Silicon Valley Bank's assets tamped down fears surrounding the U.S. banking sector.

The announcement came after derisking into dollars and yen had already hit its pinnacle on Friday.

Fed Vice Chair for Supervision Michael Barr told Congress that regulators are committed to ensuring all U.S. bank deposits are safe and are prepared to use their tools for any size institution if needed to protect the system.

The comments supported risk-sensitive currencies as well as the recovery in Treasury yields after they had plumbed lows last week as markets raced to price in more than 1% of Fed rate cuts by year-end.

Fed rate cuts of roughly 60bp in H2 are now priced in versus 45bp of ECB rate hikes seen by September before falling back about 25bp by year-end.

EUR/USD's 0.3% rise on Monday came despite 2-year bund-Treasury yield spreads falling 5bp, as rebounding risk-taking weighing on the dollar and after German business sentiment nL1N35Z13B beat forecast.

USD/JPY rose 0.77% and could clear key resistance by 131.75 if Barr's comments allow further pruning of Fed cut pricing without triggering too big a rise in yields that sparks yen-positive risk aversion.

Sterling rose 0.46% on the broad unwinding of risk-off trades and upbeat UK retailer data.

Late comments from Bank of England Governor Andrew Bailey indicating the bank's main focus is on fighting inflation, rather than worries about the health of the global banking system, may have helped somewhat.

USD/CAD fell 0.67% as oil prices soared over 5% on supply and geopolitical concerns replaced fears of demand destruction related to potential banking dislocations.

For more click on FXBUZ

• GBP$ firm into NorAm close +0.4% at 1.2273; Mon range 1.2294-22

• USD haven unwinds boost GBP despite rising UST yields on SVB deal

• Sterling eyes March highs amid haven dollar unwind, upbeat UK data

• GBP bulls get some help from upbeat CBI data, RS expectations rising

• GBP$ supported at Mon low 1.2222 then 10-DMA 1.2206, daily cloud top 1.2145

• Res 1.2294 Mon high, 1.2324 upper 30-d Bolli, 1.2341 Mar 23 high

• EUR/GBP ending NY -0.11% at 0.8790, Mon range 0.8804-0.8777

• Moves USD based on USD, UST haven unwinds; UK, ECB yields steady