• USD IMM net spec short pared in May 24-30 reporting period; $IDX +0.51%

• EUR$ long -8,011 contracts to +165,725; EUR$ -0.35% in period

• $JPY +0.88% in period, specs +15,533 contracts now -96,193

• GBP$ -0.05% in period, specs +1,646 contracts now long 13,235

• $CAD +0.74%, specs sell into USD rise +18,612 contracts short cut to 29,914

• AUD$ largest loss in period -1.41%, specs buy 4,955 on dip now -44,126

• BTC +2.04% in period, specs -706 contracts now long 187

• USD/JPY up 0.9% toward week's end on big NFP beats, upward revisions

• Clears Thur's high by 140 on 18bp surge in 2-year Treasury yields

• Mkt looks past the 0.3% rise in jobless rate, drop in AHE and workweek

• Fed still priced to skip its 11th consecutive rate hike in June

• May's 140.93 peak by 2023's channel top by 141 are the major hurdles

• Might need solid ISM non-mfg data Monday to take 141 out, eye 132.25-50

• Static JGB yields make USD/JPY vulnerable to Tsy yield swings

• US debt ceiling passage, NFP beat & China property props all risk-on

• Rebound in risk-taking weighed on the haven yen more broadly

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The dollar index rose 0.5% in the wake of non-farm payrolls and revisions beating forecast by 242k, outweighing the unexpectedly large 0.3% jobless rate rise and softer earnings enough to send 2-year Treasury yields up 16bp, despite the Fed still favored to interrupt its run of ten straight rate hike in June.

May's 339k print was the 14th consecutive payrolls report to beat forecast, though the household survey clashed with a 310k drop in employment, thus the jobless rate jump from 3.4% to 3.7% versus 3.5% forecast.

It followed jumps in JOLTS and ADP and fairly steady jobless claims and last week's above forecast personal spending and core PCE.

This week's Fed speakers made the case for skipping a hike rate at the June 13-14 meeting, perhaps to better judge cumulative and lagging credit tightening risks in H2.

Passage of the U.S. debt ceiling deal alleviates some financial and economic risk that might have restrained rate hiking plans, though the Treasury now has to sell more debt to cover measures taken to delay the default date.

EUR/USD fell 0.5%, undoing a chunk of the recovery from Wednesday's lows that came despite softer euro zone inflation, though not enough to price out at least two more ECB rate hikes.

USD/JPY rose a hefty 0.9% with JGB yields cloistered by BoJ's yield curve control that has endured despite above target inflation, while risk-on flows worked broadly against the haven yen.

Sterling fell apart after the London close, shedding 0.65% Friday in a delayed reaction to the payrolls-driven surge in Treasury yields.
Worries about a wobbly UK housing market and tenaciously high inflation outweighed risk-on flows, with a 15bp dive in 2-year gilts-Treasury yield spreads dominating.

Monday's ISM non-manufacturing carries extra weigh into the Fed's pre-meeting blackout period.

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The European Central Bank's (ECB) ongoing determination to hike rates twice more will help support the EUR/USD, according to MUFG. The bank is predicting two additional 25bp hikes, taking the key policy rate to 3.75%. The ECB's hawkish balance sheet policy, including the end of negative rates and the quantitative tightening-related rise in the term premium, is also underpinning yields in the euro-zone and shifting the capital flow dynamic.

MUFG believes the market may be underestimating the impact of the removal of negative rates. Despite deteriorating global growth expectations and rising Fed rate hike expectations in May, MUFG doubts this backdrop is sustainable. The bank anticipates euro-zone growth resilience will be supported by lower energy prices and a gradual uptick in growth in China.

MUFG also expects a potential Fed pause in June which could lead to a renewed decline in US yields and a rebound in EUR/USD. The bank targets EUR/USD at 1.13 by end of Q3 and 1.15 by end of the year.

• AUD/USD opened NY near 0.6630, drifted below 0.6620 ahead of US jobs data

• Pair traded 0.6603-0.66385 immediately after mixed US May jobs report

• US rates SRAU3, US$ eventually firmed after report; USD/CNH neared 7.1060

• AUD/USD slid but only slightly, held most gains & sat near 0.6615 late

• Equity ESv1, copper HGv1 gains likely helped limit AUD/USD's drop

• Techs lean bullish; RSIs rising, 38.2% Fib 0.6818-0.6459 broken

• May global services PMIs, US weekly claims, RBA decision are risks next week

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The rise of USD/JPY above the 140 mark has sparked some verbal intervention from Japan's policymakers, notes Credit Agricole. Masato Kanda, Japan’s Vice Minister of Finance & International Affairs, has suggested that it is preferable for FX markets to align with economic fundamentals and he is keeping a close watch on the influence of market movements on the economy. However, Kanda has notably refrained from commenting on USD/JPY’s break above the 140 mark.

In spite of this, Credit Agricole states that Kanda's verbal intervention currently stands at a modest level 2 on their intervention scale, falling significantly short of the level 7 warning indicative of an imminent FX intervention. The absence of any assertions from Japanese policymakers about FX being inconsistent with economic fundamentals or excessive volatility refrains from escalating verbal intervention towards a warning of intervention.

Furthermore, the USD/JPY pair is still away from the 145 mark which previously instigated FX intervention back in September and October 2022. In fact, fundamentals currently seem to favor a higher USD/JPY level. While upcoming Japanese GDP and labor cost data will be closely watched by investors, Credit Agricole suggests that neither release is likely to stir excitement in the market about a potential move by the Bank of Japan in June.

• No easing is eyed in 2023 after NFPs easily beat f/c

• EUR/USD traders are heavily long and volatility is falling

• One-month EUR/USD vol has dropped to a 16-month low following NFPs

• The chance of big movement is diminishing

• The likelihood of more profit-taking is growing

• Daily Ichimoku cloud 1.0806-1.0956 and 100-DMA 1.0814 weigh EUR/USD

• Cloud set to thicken in June - stronger resistance

• 21-DMA soon to cross below 100-DMA - bearish

Bank of America (BofA) concedes that while their forecasts for a strong USD performance have proved accurate, the reasons behind this prediction have somewhat deviated from the original hypotheses. Initially, BofA predicted a robust USD for the first half of the year (EURUSD at 1.05), hinging on risks from a hard economic landing. It also anticipated a softer USD later in the year (EURUSD at 1.10) as the Federal Reserve gears up for a policy shift.

BofA had foreseen stagflation as a risk scenario, leading to a stronger and longer-lasting USD than initially forecasted. The primary thesis was that core inflation would remain sticky during a downturn. However, despite persisting inflation, the robust US economy - juxtaposed with other world economies - has lent significant support to the USD in a surprisingly resilient 'non-landing' period.

Looking ahead, the direction the USD will take depends on the timing and nature of the anticipated economic landing. As BofA highlights, each month of the current year has unfurled its unique narrative, making it challenging for investors to forecast and navigate the markets. It was initially believed that 2023 would present central banks with dilemmas as they sought to balance their mandates for price stability, employment, and financial sector stability. However, this hypothesis has not come to pass due to the absence of a tangible economic landing.

Still, BofA foresees a harder landing than what markets currently expect, with risk-off sentiments possibly bolstering the USD even more. In the short term, this could lead to the USD performing even stronger than BofA's previous forecasts.

CIBC Research reacts to today's US jobs report for the month of May.

"Hiring roared ahead in the US in May, as 339K jobs were created, well above the 195K consensus expectation, and a +93K revision to the prior two-month job tally added to the upside surprise.

The hiring was relatively broad based, but that contrasted with a 310K drop in jobs that was reported by the household survey, which resulted in the unemployment rate rising by three ticks to 3.7% (vs. 3.5% expected)," CIBC notes.

"Wage growth decelerated to 0.3% m/m as expected, with the prior month revised down by a tick to 0.4%, and aggregate hours worked dropped off by 0.1% m/m, showing that there are some cracks beneath the surface of the labor market," CIBC adds.

• A good week for sterling could conclude with a bullish engulfing candle

• Only s/t bear run to reverse but engulfing supports change in direction

• Note, 14-day momentum has flipped to positive, last bullish read in mid-May

• Removal of a 61.8% Fibo at 1.2537 adds to upside risk

• Next retracement off the 1.2679-1.2308 drop is at 1.2591

• Bullish close on the week to set up further gains next week: 1.2679 a target

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• AUD/USD extends rally as China mulls fresh property stimulus package

• RBA's June meeting now live amid wage hike and hot inflation print

• Markets price a 45% chance of a hike at the RBA's June meeting 0#RBAWATCH

• Additional AUD/USD gains faces several hurdles between 0.6662-0.6753

• Near-term focus resides on U.S jobs report. Headline f/c 190k

For more click on FXBUZ

• Oversold on the daily chart and bearish momentum

• A hammer candle formed Thurs and so far being confirmed by early Fri gains

• We have taken a long at market looking to exploit a larger adjustment

• Minimum correction off the 0.8875-0.8568 drop is at 0.8640

• Target the 50% Fibo at 0.8722 and place our stop below the Thus 0.8568 low

• Weekly chart nearing oversold territory and a 55/200-DMA bull cross formed

• Corrective risk but underlying bear trend intact for now

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• Cable holds above 1.25 ahead of key U.S. NFP report

• GBP/USD continues to track yield spreads as hawkish BoE outlook underpins

• Dollar at risk of additional weakness given Fed implied June hike at 29%

• Weak NFP print likely leads to unwind of Fed hike bets, weighing on USD

• Cable hits 1.2544 to trade at highest level since May 16

• Close above 1.2545 opens up door towards May peak (1.2679)

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• Bullish signals have emerged this week and a bid is holding

• Long lower shadow Tues, hammer candle Wed and a bullish engulfing Thurs

• Price removed a minimum correction level at 1.0745, off 1.1092-1.0635 drop

• The next Fibo provides a bull target at 1.0810 (EBS pricing)

• The 10DMA had defined the recent bear trend: now provides support at 1.0745

• We lean bullish but will wait to see where the EUR closes on the week

• Potential for a weekly hammer candle as the market currently stands

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• EUR/USD has reverted to the centre of this year's range

• Lack of direction is suppressing volatility

• One-month EUR/USD vol dropped to 15-month low on Thursday

• Interest rate differentials matter more when markets are quiet

• The rate gap of at least 1.25% will favour USD throughout 2023

• Logically selling strength within the range will be more rewarding

• 2023 extremes 1.0485-1.1096 EBS, flows concentrated 1.07-1.10 April/May

• EUR/USD opened +0.69% at 1.0762 after USD broadly fell with US yields nL1N37T2VD

• EUR/USD mostly idled in Asia with Singapore holiday and ranged 1.0758/69

• Heading into the afternoon it was trading 1.0765/70

• There was no reaction to news the US Senate passed the debt ceiling bill nL1N37T1S4

• Asian equities were buoyant with the AXJ index rising 1.84%

• E-minis were only up 0.08% after S&P rose around 1.0% Thursday

• EUR/USD faces strong resistance at 1.0810/30 ahead of US jobs data

• 38.2 of 1.1096/1.0635 is @ 1.0811, 100-day MA @ 1.0813 & 21-day MA @ 1.0825

• Support is at the 10-day MA at 1.0724

• For more click on FXBUZ

The dollar, which saw a substantial rally following the unexpectedly strong JOLTS job opening data, faced a selloff after suggestions from Federal Reserve speakers Patrick Harker and Philip Jefferson. They indicated that the Fed might "skip" a June rate hike but keep the possibility of a July hike open. This terminology, first used by Christopher Waller last week, indicates a new Fed communication strategy aiming to gracefully conclude the current tightening cycle.

While this strategy offers flexibility for the Fed, data will be pivotal in deciding whether the June hike is indeed skipped. The recently released Fed's Beige Book was fairly positive, with little evidence of slowing activity and solid consumer demand. Signs of easing pressures in the tight labor market were present but not indicative of a recession. Consequently, ING suggests that the current dollar dip might not extend much further.

If Fed policy rates do stagnate this summer, carry trades might attract more interest. In this scenario, ING thinks that USD/JPY could potentially return to the 141 area.

• AUD/USD opened 1.06% higher at 0.6573 after USD fell with US yields nL1N37T2VD

• Strong commodity bounce helped AUD outperform nL1N37T0TI

• After a quiet start the AUD/USD tracked higher through the Asian morning

• Buoyant Asian equities and a 3% rise in Dalian iron ore underpinned AUD nL4N37U0C9

• News that Australia's minimum wage will be raied by 5.75% also gave support

• RBA to remain on hold according to Reuters poll, but more hikes expected nL4N37S0KD

• AUD/USD easily broke above 38.2 of 0.6818/0.6559 move at 0.6596 to 0.6612

• Resistance at 21-day MA at 0.6631 and break would increase upward momentum

• Support is at the 10-day MA at 0.6556

• Market will now look ahead to US non-farm payrolls later today

• For more click on FXBUZ

• AUD/USD building on Thursday's gains of over 1.0% in early Asia

• Risk assets are buoyant with Dalian iron ore up 1.4% and AXJ index up 1.25%

• AUD/USD at session high just below 0.6600

• Resistance is at the 38.2 of the 0.6818/0.6459 move at 0.6596

• A break above 0.6600 initially targets the 21-day MA at 0.6631

• Support is at the 10-day MA at 0.6556

• For more click on FXBUZ

• Flat - closed +0.7%, amid broad-based USD weakness as US default fears fade

• EZ inflation eased more than expected, 25pt June hike priced, July pause?

• Yield spreads tightened, 10yr bund -1bp 2.260%, 10yr UST -3bp 3.604%

• Charts; 21-day Bollinger bands contract, momentum studies conflict

• Mixed 5, 10 & 21-day moving averages - negative setup turned neutral

• Close above falling 1.0825 21-day moving average would be bullish

• 1.0744 10-day moving average and 1.0825 21 DMA initial support, resistance

• 1.0730/40 2.362 BLN and 1.0770 1.093 BLN are the close strikes for June 2

  For more click on FXBUZ

• EUR/USD opens +0.69% as dovish Fed outlook sent US yields tumbling nL1N37T30R

• The 2-year US yield has fallen nearly 30 bps since Friday's 4.639% peak nL1N37T2VD

• EUR/USD trend lower ending after close above the 10-day MA at 1.0744

• The 5-day MA now pointing higher as downward momentum wanes

• Resistance is at the 38.2 of 1.1095/1.0635 at 1.0811 and 21-day MA at 1.0825

• Support is at the 10-day MA at 1.0744 and close below would shift pressure back to the downside

• Singapore holiday to limit price action ahead of US payroll data

• For more click on FXBUZ

• AUD/USD opens +1.06% after USD broadly fell with tumbling US yields nL1N37T30RnL1N37T2VD

• Wall Street gains and bounce in commodities helped AUD outperform nL1N37T3CTnL1N37T0TI

• AUD/USD close above the 10-day MA (0.6554) suggests a bottom is forming

• Trend lower lost momentum, as the 5-day MA now tilting higher

• Resistance is at the 38.2 of the 0.6818/0.6459 move at 0.6596

• Key resistance is at the 21-day MA at 0.6630

• Support is at the 10-day MA at 0.6554 with bids tipped at 0.6505/10

• Asia likely to be quiet with Singapore on holiday

• Market will likely wait for Friday's US non-farm payrolls for next move

• For more click on FXBUZ

Nomura suggests that Commodity Trading Advisors (CTAs) may soon start to reduce their long positions in EUR/USD.

Based on their estimates of CTAs' "natural" positions, such adjustments are expected to take place next week, and the trimming could occur quite rapidly due to potential loss-cutting. As for USD/JPY, CTAs seem likely to continue increasing their long position, but this trend may not last long.

Over the forthcoming two weeks, the JPY appears susceptible to depreciation, particularly considering the anticipated rise in long positions in Japanese equities. Despite the recent weakening of the JPY, market concerns regarding potential FX interventions remain relatively low. The implied volatility for USD/JPY continues to stay below the fair value, as calculated from realized volatility and implied volatilities in US bonds and yen bonds (one-month)

• Haven dollar and yen were both sold amid Thur's risk-taking rebound

• But falling Tsy-JGB yld spreads and broader USD retreat undermine USD/JPY

• Prices looks set to close bearishly below the tenkan at 139.21

• The 23.6% of May's surge and recent lows at 138.24-26 next pivot points

• Very bearish candlesticks and an O/B top by 2023's channel top weigh

• The 200-DMA and daily kijun at 137.30/215 on EBS eyed if NFP miss

• Latest US data highly disparate and Fed touting a June rate hike skip

• That after 10 straight rises, with thoughts the hiking cycle is ending

• NFPs have repeatedly beaten forecast so any miss on 190k f/c is bearish

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