eFXplus DATA

NAB discusses NZD/USD technical outlook and adopts a bearish bias in the near and medium-term. NAB now targets NZD/USD at 0.6435 in 1-.month, and at 0.6250 in 3-months.

"Last week’s close below the previous 2019 range of 0.6575/80 to 0.6939/42 confirms that NZD/USD has returned to its multi-year downtrend. Since late 2016 NZD/USD has trended lower in a perfect parallel downtrend channel. The base of the channel is currently at 0.6250/70 and provides an excellent MT target.

The confirmed break of the previous 2019 range / rectangle has a textbook target at 0.6200/50 and coincides with the base of the channel in time," NAB notes. 

"ST, MT and LT momentum confirm a comprehensive negative MT momentum bias and maintain immense downward pressure in the coming weeks to months," NAB adds. 

• GBP/USD ends NY 1.2710 +0.41%, firm into NY close, NorAm range 1.2711-1.2647
• May's exit brings little joy for GBP/USD
• Shallow rally on news hints at lingering UK Brexit, political uncertainties
• The crucial factor remains, traders are not short pounds
• EUR/GBP -0.17% to 0.8817, EU elex and GBP rise on May exit weigh on cross

USD/JPY has cracked yesterday and early today's 109.46 lows and is threatening a bearish weekly close amid lingering trade war angst and increasing concerns about the health of the U.S. economy.
Prices are nearing a holiday truncated week's completion below the weekly cloud base at 109.55 and close to the 38.2% retracement of the post-flash-crash 104.10-112.40 rebound at 110.23, as well as the weekly kijun at 109.07 that's close to May's 109.02 low.
A close below that cluster of support would likely be accompanied by fresh equities and Treasury yield drops, emblematic of distrust in the U.S. and China quickly resolving trade and structural disputes or for the Fed to ease swiftly enough to avert further safe haven trading weighing on USD/JPY.
If USD/JPY ends May below April's 110.66 low, it will confirm the same bearish, monthly candlestick signal that began the tumble to January's low .
Miserable U.S. PMI data yesterday and today's core durable goods miss that is yanking Q2 GDP estimates lower dim the prospects for U.S. yields and USD/JPY rises without some good news on trade.
A sub-109 close would likely squeeze out most of the remaining IMM yen spec shorts with a fall to 108.50 next.

TD Research discusses the current conditions of the FX market and some of its preferred tactical views.

"For the all the headline ping-pong this week the broad USD actually looks set to end the week lower. That partly reflects the fact that US risk assets are no longer immune to the trade skirmish, especially as some critical data releases massively underperformed expectations. Past strength of the USD will have negative implications for both growth and earnings. These drivers probably keep FX in wait-and-see mode until the G20," TD notes. 

"Still, this backdrop remains supportive of cross trades. We showed yesterday that short-term value trades have outperformed momentum. Following that script implies trimming short exposure to GBP and adding long GBPCHF.

On the flip side, AUD looks rich and that implies around a 1% move lower in AUDNZD. We also like downside in AUDCAD going into the BoC meeting next week," TD adds. 

Cable initially rallied when PM May announced she would step down as Conservative Party leader on June 7, but the celebration was brief as the market saw the event as the beginning of a new period of Brexit uncertainty that will cast a pall over the UK economy and the pound.
The pair rose to 1.2719 and has since fallen back near its pre-announcement levels in the mid 1.26's.
GBP bulls need a rise above the falling 10-DMA at 1.2763 to remove the existing bearish tone, with a move above the 200-DMA at 1.2956 giving GBP/USD bulls momentum.
Today's development leaves an assortment of Brexit options on the table once the new PM takes over nL5N2302BY, including second referendum, general elections and no-deal exit.
If worries over a no-deal Brexit and new general election pick up, GBP/USD finds light support at Thursday's low of 1.2605 and the lower 30-week Bolli at 1.2553.
More firm support is at 1.2409, the Jan. 3 and 2019 low.

MUFG Research discusses tactical USD/JPY outlook and adopts a neutral bias, expecting the pair to trade in a 109-111 in the near-term.

"USD/JPY upside has been heavy since last week because of growing concerns that the trade friction between the US and China could be prolonged. Over the near term, USD/JPY is unlikely to hit the 111.00-level, with the US-Japan yield spread unlikely to widen. However USD/JPY downside firmness is clear, with the lower end only in the 109.00-level after the end of Golden Week," MUFG notes. 

JPY selling is unlikely to boost USD/JPY, while the break below the 110.00-level would probably support USDJPY because Japanese investors would be expected to buy more overseas securities. Overseas bond investing flows are strong, given the dearth of investing opportunities at home. USD/JPY will probably not be moving much either way through the end of May," MUFG adds. 

• Hanging heavy within a tight range as dust settles on a sharp Thurs drop
• Bear bias intact: run back to May 14/15 109.15 dble day low on the cards
• Weekly action shows price again attacking the base of its cloud
• Cloud base was breached last week but mkt failed to close below
• The market has attempted six times to close under since Feb: blow-out risk
• The cloud is thick and has a base at 109.55 this week

• Cable down half-a-cent from 1.2710 high immediately after PM May exit news
• See: nL5N2300L0. 1.2710 = high since Thursday's 1.2605 low
• 1.2605 = 20-week low, courtesy of heightened fears of a no-deal Brexit
• Boris Johnson is the bookmakers' favourite to succeed May nL5N22Z4F0
• BUZZ-GBP/USD could drop to 1.20 if Boris gets the gig
• 0.8804 was immediate EUR/GBP low after May exit news, 0.8832 = ensuing high

• Cross met fresh headwind pre-0.8840 after following EUR/USD up early Europe
• Offers just shy of 0.8840 (Feb 14 high) also capped gains Wednesday-Thursday
• 0.8838 and 0.8837 were Thursday's highs, with 0.8790 marking the interim low
• EUR/GBP bulls hope expected May exit news prompts fresh selling of the pound
• See: nL5N2300L0. EUR/GBP has risen for a record-breaking 14 days in a row
• 0.8850 = 1.13 GBP/EUR. 0.90 and 0.91 among bull targets beyond

• EUR/USD new trend low @ 1.1106 yesterday then rebound reaching 1.1205 today
• Pair closed over 21-DMA @ 1.1189 but drivers for the rally have dissipated
• Rebound was triggered by risk aversion stemming stocks and oil falls
• Both oil and stocks have stabilised. Mood to pare euro shorts likely fades
• Further rise likely depends on initiation tech inspired longs, counter trend
• 55-DMA 1.1237/May 13 high to offer strong resistance. Trends are your friend

• USD/JPY stays soggy at 109.60 even as US yields stage minor bounce
• UST 10y last at 2.329% vs prev close 2.320%; E-minis +0.3%
• Japan core CPI rises 0.9% y/y, as expected; little effect on JPY
• But USD/JPY charts will turn negative pending Fri close below 109.55
• Weekly Bollinger downtrend channel activated will encourage sellers
• Weekly Ichimoku Cloud base would also be breached, exposing downside

EUR/USD: 

24-HOUR VIEW: Rebound in EUR has scope to extend but 1.1210 is expected to offer solid resistance. Expectation for EUR to trade sideways was incorrect as it dived to 1.1106 before rebounding strongly. While the rapid recovery appears to be running ahead of itself, there is scope for it to extend higher. That said, any further advance in EUR is expected to face solid resistance at 1.1210 (next resistance is at 1.1230). On the downside, 1.1130 is likely strong enough to hold any intraday pull-back (minor support is at 1.1160).

1-3 WEEKS VIEW: EUR is likely to trade sideways. While we indicated yesterday (23 May, spot at 1.1155) that the “risk of a break of 1.1130 has increased”, we were of the view “it is too soon to expect EUR to crack last month’s low at 1.1110”. Expectation for a “break of 1.1130” was correct but the move below 1.1110 (low of 1.1106) and the subsequent sharp rebound that hit an overnight high of 1.1187 came as a surprise (the 81-pips range registered yesterday is the largest 1-day range in a month). The price action yesterday has clouded the outlook even though the manner of which EUR rebounded ahead of 1.1000 suggests we may have seen a short-term bottom at 1.1106. That said, it is premature to expect a sustained rebound. For the next couple of weeks, EUR is more likely to consolidate and trade sideways, likely within a 1.1130/1.1230 range.

GBP/USD: 

24-HOUR VIEW: Short-term bottom in place, GBP is expected to trade sideways to slightly higher, likely within a 1.2630/1.2710 range. Yesterday, we expected GBP to “retest the 1.2625 level but oversold conditions suggest a drop below 1.2600 is unlikely”. In line with expectation, GBP touched 1.2605 before staging a surprisingly robust recovery (NY close of 1.2657). The combination of oversold conditions and dissipating downward momentum suggests 1.2605 is likely a short-term bottom (GBP is not expected to move below this level for today). That said, it is too soon to expect an extended recovery. GBP is more likely to consolidate and trade sideways to slightly higher, likely within a 1.2630/1.2710 range.

1-3 WEEKS VIEW: Weakness is severely oversold but 1.2600 is beckoning. There is not much to add to the update from yesterday (see reproduced update below). GBP came very close to 1.2600 as it touched 1.2605 before staging a robust recovery. After yesterday’s price action, the beckoning call of 1.2600 has softened.While we indicated on Tuesday (21 May, spot at 1.2735) that the “focus is at 1.2670”, we were of the view “oversold conditions suggest the prospect for further extension to the next support at 1.2630 is not high”. However, GBP extended its decline as it plummeted to 1.2625 during NY hours before recovering. Despite the relatively large drop, we still have doubts on whether the current ‘negative phase’ that started in mid-April (see annotations in chart below) could extend further. From here, the next support is at 1.2600 but once below this level, the next significant support is another 100 pips lower at 1.2500. On the upside, only a move above 1.2760 (‘key resistance’ previously at 1.2840) would indicate that the ‘negative phase’ has ended. Meanwhile, the round number support of 1.2600 is beckoning.

AUD/USD: 

24-HOUR VIEW: Room for AUD to advance but lackluster momentum suggests any up-move could be limited to 0.6925. AUD traded between 0.6865 and 0.6900 yesterday, right within our expected range of 0.6865/0.6900. The firm daily closing in NY (0.6899) suggests there is room for AUD to advance from here. That said, lackluster momentum indicates that any up-move is likely limited to a test of 0.6925. The next resistance at 0.6945 is a solid level and is unlikely to be challenged. Support is at 0.6885 followed by the 0.6865 low. The latter level is acting as a very strong support now.

1-3 WEEKS VIEW: Prospect for a move to 0.6835 has diminished. There is no change to our latest narrative from Tuesday (21 May, spot at 0.6925) wherein the “prospect for a move to 0.6835 has diminished”. We added on Wednesday (22 May), “AUD has to ‘punch’ below last week’s 0.6865 low and accelerate lower or the risk of a short-term bottom would increase quickly”. It is worth noting that AUD touched 0.6865 yesterday (23 May) before rebounding strongly. While it appears increasingly likely that the ‘negative phase’ in AUD that started in late April (see annotations in chart below) is close to ending, confirmation of a short-term bottom is only upon a move above the ‘key resistance’ at 0.6945 (no change in level).

NZD/USD:

24-HOUR VIEW: Further up-move would not be surprising but a move beyond 0.6545 appears unlikely. Expectation for NZD to “drift lower to 0.6465” did not materialize as it rebounded strongly after touching 0.6482. The rapid rise is running ahead of itself and while further up-move would not be surprising, a move beyond 0.6545 appears unlikely (there is another strong resistance at 0.6560). On the downside, the 0.6482 low is not expected to come into the picture (minor support is at 0.6505).

1-3 WEEKS VIEW: NZD could be close to making a short-term bottom. NZD dipped to 0.6485 yesterday (23 May) before rebounding strongly to end the day higher by +0.36% at 0.6519 (largest 1-day gain in 3 weeks). The price action is not surprising as we indicated on Wednesday (22 May) that “NZD could continue to edge lower but 0.6465 is expected to offer solid support”. The combination of waning momentum and oversold conditions suggests the ‘negative phase’ that started earlier this month is close to completion. In other words NZD could be close to making a short-term bottom even though confirmation is only upon a move above the 0.6560 ‘key resistance’ (no change in level). From here, unless NZD can ‘punch’ below 0.6485 within these 1 to 2 days, a breach of 0.6560 would not be surprising. Looking ahead, a move above 0.6560 would indicate that NZD has moved into a ‘sideway-trading phase’.

USD/JPY: 

24-HOUR VIEW: USD could dip below the strong 109.40 support but last week’s low near 109.00 is unlikely to come under threat. While we highlighted yesterday “upward pressure has dissipated”, we expected USD to “trade sideways within a 110.00/110.50 range”. The ease of which USD cracked 110.00 and the subsequent plunge to 109.45 came as a surprise. The sharp decline is running too fast, too soon but the weakness is not showing sign of stabilizing just yet. From here, barring a move above 110.00 (minor resistance at 109.75), USD could dip below the strong 109.40 support but last week’s low near 109.00 is unlikely to come under threat.

1-3 WEEKS VIEW: USD has moved into a sideway-trading phase. We have held the same view since Tuesday (21 May, spot at 110.05) that USD has “moved into a sideway-trading phase”. USD subsequently came close to the top of our expected 109.40/110.80 sideway-trading range (high of 110.67) before diving yesterday to an overnight low of 109.45, just above the bottom of our expected range. For now, there is no change to our view but we are not ruling out a dip below 109.40. That said, only a break of 109.00 would indicate that the current ‘sideway-trading’ phase has morphed into a ‘negative’ one.

• -0.1%, as Westpac, early doves, raise their call to three RBA cuts in 2019
• New call suggests a bearish global growth outlook and its Australian impact
• Refinitiv RBAWATCH OIS prices: 86% June cut, 99% in Sept, only 8bp in Dec
• Yesterday's bounce leaves positive momentum studies, conflicting 5 & 10 DMAs
• A major triple bottom just above 0.6860 now pivotal support
• Close above 0.6903 falling 10 DMA would end downside bias

• Shade firmer, closed flat amid broad USD weakness, EUR/GBP closed +0.3%
• Media confident that PM May to resign on the week of June 10 nL5N22Z0PV
• Boris Johnson is favourite for PM, raising chances of 'no deal' nL5N22Z2HZ
• Political outlook remains fluid, scant reason to bargain hunt nL5N22Z4Z7
• Daily momentum studies conflict, 5, 10 & 21 DMAs trend south - bearish setup
• Close below 1.2638, 76.4% 2019 rise would target the 1.2409 2019 low
• Close above the falling 1.2762 10 DMA would suggest consolidation

• Flat after closing +0.25% on softer UST yields and broad USD weakness
• Yesterday's bullish outside day would be validate by a close above 0.6900
• Rise leaves positive momentum studies, 5DMA poised for a bullish 10DMA cross
• A major triple bottom just above 0.6860 now pivotal support
• Close above 0.6904 falling 10 DMA would end downside bias
• 0.6850 455M, 0.6900 460M and 0.6940 500M are the close strikes

• USD/JPY declines 0.65% Thursday as U.S.-China engage in verbal duel on trade
• Increasingly aggressive tone from both sides rattles risk mood nL4N22Z35N
• Global growth concerns back to fore, mfg PMIs in U.S., Germany, Japan drop
• U.S. yields plummet, global stocks selloff sparking flight to safe-haven JPY
• Japan core April CPI & government's monthly economic report for May due Fri
• Report may downgrade assessment of economy, hold hints of Oct sales tax hike
• Tue failure near 110.71, 50% of Apr-May drop negative; support 109.34-41

CIBC Research discusses the JPY outlook and maintains a bullish bias in the medium-term. CIBC targets USD/JPY at 106 in Q3.

The re-awakening of US-China trade concerns has caused cross-JPY pairs to test key support levels – including USDJPY. This has also led to increased FX volatility, as volatility is still over 1-vol cheaper than last year’s average. Should we see a sustained pick up in volatility, expect USDJPY to continue to press lower, as domestic retail investors repatriate overseas earnings and reduce short JPY positions," CIBC notes. 

"In aggregate, the BoJ is more concerned about Japan’s near-term economic outlook, especially given the decline in exports and the looming consumption tax hike expected in October (from 8% to 10%). Nevertheless, and the consumption tax may prove to be less of an issue this time around. Domestic fundamentals will take a backseat to macro risk dynamics in the near- to mediumterm, which favour an outperforming JPY," CIBC adds. 

• Pair heavy in early NY, global growth concerns & bond yield drops weigh
• AUD/USD bears can only match the May 17 low, rally then ensues
• Downbeat US data sinks interest rates, US$ sold across the board
• USD/CNH slides near 6.9200 on PBOC stable yuan rhetoric nB9N22K050
• AUD/USD goes +ive on the day, clears May 22 high & nears 0.6900
• Daily techs lean bullish, RSI diverges & bull hammer forms
• Yuan and Fed risks could keep bears on edge

AUD/USD bears might be having a rethink after failing in their latest attempt to crack support at last week's low of 0.6865.
Downbeat euro zone data and ECB concerns about growth fueled concerns that global growth remains anemic.
Heightened U.S.-Sino trade tensions bolstered growth concerns.
Global bond yields dived on those worries, helping push AUD/USD lower, but other cross currents are now at play.
A PBOC paper saying the bank is able and confident in keeping yuan stable drove USD/CNH down near 6.9250.
Downbeat U.S. economic data nN9N21F00Z nLNSNGEF47 sent U.S. Treasury yields spiraling lower .
The U.S. yield drop outpaced the slide in Australian yields, tightening Australian-U.S.
spreads.
The U.S. data also resulted in sharp price rallies for eurodollar EDH0 and fed funds FFZ9 futures, suggesting increased odds of Fed rate cuts.
With better chances for Fed rate cuts investors are less attracted to the greenback.
As a result AUD/USD bears have taken a step back and the pair is rallying.
Daily technicals signal a potential bounce, with RSI biased up after diverging.
Bulls still hold the upper hand and only a move above 0.7000 might give bulls some comfort.

TD Research discusses USD/CAD outlook and adopts a buy-on-dip strategy, looking to buy dips at 1.3250-13300.

"The backdrop continues to favor the USD across the G10, especially following this morning's lackluster data dump. CAD has also been a topical currency, reflecting some modest tailwinds on data and trade wars.

We discuss some of the drivers related to the cyclical and structural story...USDCAD runs a bit cheap to growth dynamics, suggesting that this momentum trade is likely to fizzle out like the rest over the past year," TD notes. 

"In turn, we still think that USDCAD remains a buy on dips even though the newsflows has turned a bit more positive. For USDCAD, our preferred buy-in level sits between 1.3250/1.3300.

Still, the rally in USDCNH and scope for more two-way risks ahead of the G10 suggests that CAD should outperform some China proxies like SGD, TWD or AUD in the very short-run," TD adds.