June 2 (Reuters) - With no resolution to the Iran conflict, FX remains in limbo. Implied volatility across G10 and many emerging market pairs hugs long-term lows, faithfully mirroring the absence of realised volatility amid familiar ranges. USD/JPY is the week's focal point. Pinned just below 160.00 since official intervention knocked the pair back to 155.00 on May 6, spot has crept back to the 159.70s, already drawing verbal warnings from Japanese officials. A large cluster of exotic barrier structures — built to exploit the intervention threat — are set to expire this week. Their presence has kept dealers long gamma, mechanically suppressing spot and dragging 1-month implied vol to four-year lows near 6.0. Once those positions roll off, the restraint eases. Beneath the surface, 1-month 10-delta butterfly spreads have doubled since the May 6 lows, quietly pricing a sharp move in either direction. The spring is coiled. EUR/USD tells a simpler story. Implied volatility sits at 2026 lows, risk reversals retain only a marginal 0.25 premium for EUR puts — a fraction of the 1.5 peak for downside over upside strikes achieved at the height of Iran tensions — and large expiry-related hedging flows are actively suppressing any range break. Breakout risk, for now, looks low. USD/CNH quietly stands out. Spot has ground to a fresh three-year low of 6.7580 in an orderly, unhurried decline, pulling 1-month implied vol to 2.2 — within a whisker of 2015 decade lows. Compressed premiums make hedging unusually cheap, but a vol base this low can reverse fast and hard if spot breaks with conviction.

The options market is pricing calm. In USD/JPY at least, that assumption may face its first real test this week.
Benchmark 1-month expiry FXO implied volatility


USD/CNH FXO option implied volatility


USD/JPY spot and 1-month 10 delta butterfly spread


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

Credit Agricole CIB Research highlights 2 key macro drivers that point to a lower EUR/USD ahead,

"The past few weeks witnessed a marked deterioration of the relative EUR-USD fundamentals. This was reflected in the joint drop of the EUR-USD nominal rate spread our proxy for the relative ECB-Fed policy outlook - and the EUR-USD real rate spread our proxy for the relative Eurozone-US growth outlook. The former reflected the reassessment of dovish market expectations that boosted the relative rate appeal of the USD vs the EUR. The latter followed a string of disappointing data releases in recent weeks that cast doubts over the Eurozone growth outlook," CACIB notes

Looking ahead, we believe that the two fundamental drivers could remain a drag on EUR/USD. Starting with the nominal rate spread, the upcoming ECB and Fed meetings in June could keep the EUR rate disadvantage vs the USD in place if the Governing Council delivers a 'dovish' hike while the FOMC signals that sticky US inflation could delay any meaningful easing. The EUR-USD real rate spread should also remain subdued as the continuing conflict in the Middle East perpetuates the global negative energy shock that is particularly detrimental for the Eurozone economy," CACIB adds.

Goldman Sachs preview the incoming speech by BoJ Ueda.

"Big focus on Ueda's speech tomorrow likely the last communication before the June MPM. Market is pricing in roughly a 76% probability of a BOJ rate hike in June with trading desks thinking looks too skewed towards June vs. July with current information set. In USDJPY, market only has 10bps of spot jump max for the event, but this is somewhat reflective of dealers continually deriving longer gamma due to the current barrier concentration through 160," GS notes. 

"Market expects a hawkish tone with potential hints toward June action. Given elevated expectations, any lack of signal will be read as dovish. This puts Ueda in a difficult position though, our read is he will want to avoid signalling June hike, but will need to stay balanced to prevent sharp USDJPY moves or further JGB volatility following today's rally.

So we think he will sound hawkish while not indicating June hike. With that, while we see June as a live meeting, we still think the pricing looks too skewed towards June (78%) vs. July with current information set. If no clear signal, would expect June to reprice close to 70% chance of hike," GS adds.

• AUD/USD fell below the 10-DMA overnight, hit 0.7153, buyers then emerged

• Drops in Us yields , oil helped drive a bid for riskier assets

• Gold , silver , copper rallied & USD/CNH hit a 3-1/4-year low

• AUD/USD pierced the 21-DMA, hit 0.7186, NY opened nearby, pair was up +0.31%

• The pair's rally stalled short of key resistance in the 0.7200 area

• Break of that resistance suggests head & shoulders pattern on daily chart is negated

• US April JOLTS is a data risk in NY's morning
audusd


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

• EUR/USD has been stuck in a meagre range around the low 1.16's for over 2-weeks and 1.1850-1.1400 since the Iran conflict

• EUR=EBS range so far Tuesday 1.1652-29, well inside Monday's 1.1665-06 range

• The 200-dma at 1.1682 remains a key impediment , breached for 1.1686 highs on Friday, but bulls need a close above

• The 1.1633-1.1700 daily cloud is adding to current resistance and doesn't thin until early July

• The lack of volatility and range break-out risk is reflected in FX option pricing - lowest volatility premiums in 2026

• FX hedging of huge and pre expiry FX option positions is adding to EUR/USD shackles of late - more strikes expire today
EUR=EBS


EUR/USD FXO implied volatility


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

June 2 (Reuters) - In an age of fragmented five-party politics in Britain, it may be worth considering the previously unthinkable: namely, could the next UK general election tee up a possible Conservative-Labour coalition government? And would sterling traders like it if it happened?

The answer to the currency question would probably be yes, if centrists from both parties held sway in a mould-breaking "grand coalition". One such centrist, Shabana Mahmood, has reportedly been lined up to be Britain's finance minister if Andy Burnham becomes Prime Minister. Wes Streeting is another high-profile Labour centrist, who might conceivably work amenably alongside centrist Tories in a coalition government.

Although a Labour-Tory coalition may at present sound fanciful, it might be better for GBP than some of the possible alternatives if the next general election returns a hung parliament (no single party with overall control). Those alternatives include a Labour-led coalition government including one or more of the Liberal Democrats, Greens and Plaid Cymru, and a coalition between Nigel Farage's Reform and the Tories.

Related:
GBPUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

June 2 (Reuters) - A strong monthly bull trend for the Australian dollar versus the New Zealand dollar might be about to reverse as technical signals give warning.

The monthly candlestick chart recorded a bearish engulfing pattern in May, which suggests AUD sellers might have gained the upper hand. A bearish engulfing pattern is a two-candle reversal signal that appears after an upward move. The first candle is a smaller bullish candle. The second candle is a larger bearish candle whose real body completely engulfs the first candle's real body. Like all candlestick patterns, it's not reliable on its own and is best confirmed with other indicators or price action.

AUD/NZD also formed a bearish key month reversal, a similar pattern to the engulfing line. A key reversal month is a chart pattern that signals a potential change in market direction. Occurring within a single trading month, it features a new high or low, followed by a sharp price shift and a close beyond the previous month's trading range. It suggests that buyers initially pushed the price up, but sellers took control later in the month, exhausting the bullish momentum.

Fibonacci retracement levels taken off the 1.0653 to 1.2282 bull trend provide downside targets. The initial retracement levels are 1.1898, 1.1660 and 1.1468, 23.6%, 38.2% and 50% Fibonacci levels, respectively.
AUD/NZD Monthly chart:


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

• USD/JPY has risen from 159.60 to 159.74, on Tuesday, EBS data show

• Japan tempers yen warnings despite renewed slide towards key 160 level

• An internal model shows USD/JPY should be trading well above 160

• Outlook technically bullish as spot continues to trade above the daily cloud

• The daily cloud currently spans the wide 156.52-158.87 region

• 30-day log correlation between USD/JPY and EUR/JPY is above +0.5 (pairs moving in tandem)

• SMFG markets chief: BOJ should signal clear rate path after June hike

Daily Chart


Correlation Chart


(Martin Miller is a Reuters market analyst. The views expressed are his own)

• Cable rises to 1.3481 as risk-sensitive GBP benefits from lower government bond yields

• 10-year UST yield falls 4.9 bps. 1.3481 is high since Friday (1.3485 was high that day)

• Lower government bond yields influenced by Hezbollah-Israel partial ceasefire news

• 1.3407 was GBP/USD low on Monday - before dollar weakened on Trump guidance

• UK Tuesday newspaper front pages dominated by Mandelson documents

• BoE's Bailey to address House of Lords Economic Affairs Committee at 1400 GMT

GBPUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

• Shares of Australian gold stocks rise as much as 2% to 16,727.2, their third-straight day of gains

• Sub-index tracks gold prices higher, supported by softer U.S. Treasury yields and a partial Hezbollah-Israel ceasefire [GOL/]

• Unico Silver and Southern Cross Gold Consolidated led gains on the sub-index, each rising over 13%

• Sector heavyweights Northern Star Resources and St Barbara advanced 12.8% and 3.4%, respectively

• AXGD up over 5% this year, including the day's move

(Reporting by Roushni Nair in Bengaluru)

• GBP/USD unchanged in Asia as Iran impasse forces traders to the sidelines

• Conflicting reports on Iran talks, fragile Lebanon ceasefire dents risk

• Wall Street futures sag; Nasdaq futures down 0.7%, Nikkei down 1.7%

• BoE Governor Bailey speaks to House of Lords Economic Affairs Committee Tue

• Has signaled no need to act quickly on inflation jump

• Consolidation in a broad 1.3350-1.3500 range likely to continue

• Support 1.3400-05, 1.3370-75, resistance 1.3470-80, 1.3500

• Monday range 1.3407-1.34755; Asia 1.34515-1.3459
UK unemployment rate and wage growth:

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

• EUR/USD heavy in Asia, 1.1629-36 EBS in sleepy trading

• Back below daily Ichimoku cloud between 1.1644-1.1702

• Also mostly below hourly Ichimoku cloud between 1.1636-56

• 100-HMA in cloud at 1.1638 above, 200-HMA in area of spot at 1.1631

• Middle East impasse a drag on EUR/USD despite ECB rate hike expectations

• In options, expiries today on 1.15 total E2.5 bln, 1.1600-30 E3.1 bln

• Between 1.1640-95 total E2.9 bln and massive E12.1 bln up on 1.17

• Option expiries today again look to contain spot action

• EUR/GBP heavy too, 0.8644-45, range since May 25 0.8619-0.8681

• E941 mln in option expiries today just above at 0.8710 strike

• EUR/JPY in contrast buoyant though in stasis still, 185.42-95 yesterday

• Looks to be in area still today in 184.39-186.21 daily Ichimoku cloud

• EUR/CHF too between 0.9150-55 EBS, in 0.9123-98 hourly Ichimoku cloud

• Resistance from descending 100-HMA at 0.9167 however

• Related comments , , also
EUR/USD:


EUR/USD nearby option expiries this week:


Euro zone inflation and ECB interest rates:

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

• AUD/USD +0.1% Tue, activity subdued as U.S.-Iran impasse continues

• RBA monetary policy board member Harper concerned on persistent inflation

• AU raises minimum wage 4.75%, likely to compound inflationary pressures

• AU Q1 current account 27.1 bln deficit, Reuters poll consensus -23.2 bln

• Mixed messaging on Iran continues, peace talks may or may not have stalled

• AUD looks vulnerable to downside, drift towards 0.7080 support zone possible

• RBA officials Bullock & Kent to appear before Senate Committee Wed

• Range Asia 0.71575-67, support 0.7080 0.6834, resistance 0.7200 0.7283
AUD Daily 55-DMA

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

• USD/JPY on slightly higher plane but Japan intervention risk continues

• Asia so far 159.60-67 EBS, follows trudge up to 159.77 yesterday

• Risk of Japanese FX action seen larger, MOF waiting for more USD longs?

• MOF-speak conspicuous in absence yesterday, renewed jaw-boning today?

• USD/JPY now clearly above 156.52-158.87 daily Ichimoku cloud

• Cloud looking to taper going forward, top fall, base rise towards 158

• Tech support from 159.53 hourly Ichimoku kijun, ascending 100-HMA 159.41

• Hourly Ichimoku cloud 159.29-32 below

• Massive $2.3 bln in option expiries today between 158.50-159.10, supportive

• Some at 159.75 strike above and larger $1.7 bln up at 160.00 strike

• JGB-US Treasury 2-year rate differentials narrower, 10s near recent lows

• Middle East impasse, higher crude oil prices to continue to weigh on JPY

• Related comments , , ,

• Also , on Middle East ,

• US markets , , ,
USD/JPY:

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

• NZD/USD -0.9% from Mon 0.5986 high as markets revisit Middle East quagmire

• Reports Iran halted U.S. message exchanges raise concerns over peace talks

• Trump counter claims 'talks are continuing, at a rapid pace' with Iran

• Brent crude finishes +4.5% after earlier spike to $97.79 a barrel

• NZ Q1 terms of trade data due Wed, import/export prices to be scrutinized

• Range NZ 0.5932-405, support 0.5815 0.5680, resistance 0.5990-95 0.6012
NZD Daily 55-DMA

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

Danske Research adopts a negative bias on EUR/USD on upcoming data EUR/USD releases this weel.

:'EUR/USD edged higher towards the end of last week, driven largely by optimism that US and Iran are nearing a preliminary agreement and consequently lower oil prices. FOMC participants sent mixed signals on the policy outlook on Friday, as Schmid (non-voter, hawk) argued the Fed 'may need to weigh how to make monetary policy more restrictive' while Bowman (voter, dove) cautioned that 'reacting to temporary energy shock could weigh down the economy' whilst defending the April easing bias," Danske notes.

'The upcoming week will bring plenty of key data input for the June rate decisions, with US May ISM Manufacturing index due for release already today - the Fed's regional manufacturing indices are signalling potential for a modest uptick. Later, we forecast Euro Area May HICP at 3.1% y/y on Tuesday (below consensus) and US May NFP at +110k on Friday (above consensus). As such, we think macro releases could well push EUR/USD lower even if energy prices continue declining," Danske adds.

• AUD/USD +0.4% from Mon 0.7135 low, but Middle East tensions still weigh

• Tasnim news agency says Iran has stopped message exchanges with U.S.

• Trump claims 'talks are continuing, at a rapid pace' with Iran

• RBA monetary policy board external member Ian Harper speaking 0030 GMT

• AUD remains fragile, likely to fade towards 0.7080 support zone

• AU Q1 current account due Tue, Reuters poll consensus 23.2 bln deficit

• RBA officials Bullock & Kent to appear before Senate Committee Wed

• Overnight range 0.7135-86, support 0.7080 0.6834, resistance 0.7200 0.7283
AUD Hourly Bollinger Study & DXY Daily 55-DMA

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

• NY opened near 1.1650 after 1.1665 traded overnight, bears reigned early-on

• Report from Iranian TV indicating the ceasefire could end drove risk-off sentiment

• USD, US yields and oil rallied sharply on the headline

• Equities, silver, copper turned down while gold added to losses; EUR/USD hit 1.1606

• The pair then bounced as USD selling faded & stocks, silver, gold moved upward

• Bounce intensified when Pres. Trump said no troops will go to Beirut after call with Netanyahu

• USD dropped, stocks & silver turned positive; EUR/USD neared 1.1640 late, traded down -0.23%

• Techs lean bearish; RSIs are falling, the pair trades below 21-, 55- & 200-DMA
eurusd


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

• NY opened near 0.7175 after 0.7190 traded overnight, pair extended that drop

• Sharp fall ensued on report Iran could end ceasefire if Israel attacks Hezbollah in Lebanon

• USD, US yields , oil rallied sharply as risk sentiment soured

• Gold added to losses, silver & equities

turned lower

• AUD/USD hit 0.7135, the pair then bounced as USD buying abated & risk improved

• Report that Pres. Trump said no Israeli troops will go to Beirut rallied risk assets

• Silver, copper & stocks turned up while oil, yields & USD softened

• AUD/USD neared 0.7170 late, it traded down -0.21% in NY's afternoon

• Falling daily RSI, hold below resistance near 0.7200 are concerns for bulls
audusd


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

ANZ Research discusses EUR/USD outlook this week.

"The key risk this week is inflation. Germany’s flash CPI for May will set the tone, followed by the EA’s flash CPI. Consensus is already expecting headline EA CPI near 3.2%, above the 3% print for April. If CPI meets or misses expectations it will reopen the rate-hold debate and weaken the EUR more quickly. The market is broadly pricing-in a June hike; so, in terms of price action, EUR/USD will be more sensitive to an inflation miss on the downside, which could drive sharp moves lower and test 1.153. An above-expectation print would firm up a June hike, which is largely already reflected in the pair," ANZ notes.

"Geopolitics remains the biggest catalyst. Any good news around the Middle East conflict will see the EUR/USD higher, testing 1.18, but until then the pair is likely going to remain within recent ranges, unless the CPI misses and reports a less inflationary outcome in EA, which will see the pair lower," ANZ adds.

• Ether rallied to 2019.38 overnight, sellers emerged, it then turned lower

• Geopolitical tensions drove investors out of riskier assets and into safe-havens

• USD rallied sharply while US yields & oil

added to gains

• Gold , equities fell and USD/CNH hit a fresh session high

• Ether fell to 1969.87, it neared the May 28 daily low which sits at 1967.26

• Break of that low would complete the recent consoldiation phase Ether is in

• Consolidation completion suggests Ether's broader down trend can resume

• February's monthly low at 1751.94, 2025 yearly low at 1387.02 are then in focus
eth


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

Credit Agricole CIB Research discusses the FX market outlook in lights of the latest developments of US-Iran conflict.

"Investors have been preoccupied with trying to time the end of the US-Iran conflict ever since the ceasefire between the two was announced in early April. Recent media reports have suggested that a memorandum of understanding has been agreed but its approval by the US (and Iranian) leaders remains uncertain. Our assumption is still that the standoff would ultimately be 'frozen', with the ceasefire period extended to accommodate future negotiations over Iran's nuclear programme and the Strait of Hormuz (partially) reopened. We further continue to see September as a 'hard deadline' of sorts," CACIB notes.

"As a result, we expect global energy costs to ease somewhat but remain above their pre-war lows. While this may help contain inflation risks, the risk of energy demand destruction and thus a negative economic shock could grow. In FX, the above developments could mean that in H226 investors may start to shift their focus from nominal rate spreads (a proxy for relative central bank outlook) to real rate spreads (a proxy for relative growth outlook). The USD is trading at a discount relative to its relative real rate appeal and could recover in coming months," CACIB adds.

• Cable falls to 1.3427 as safe-haven dollar strengthens on news from Iran

• Iran is stopping message exchanges with U.S. through mediator, agency says

• 1.3427 is intra-day low (1.3409 was Friday low). 1.3475 was Ldn am high

• Government bond yields rise on Iran news; 2-year gilt yield up 8 bps on day

• BoE is watching public-sector pay for inflation risk, governor Bailey says

• Burnham remains the odds-on favourite to be UK Labour Party's next leader

GBPUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

Bank of America Global Research discusses the USD Index (DXY) technical outlook and flags the 98.93. level as a critical support that needs to hold for a move towards 100.38 ahead of 103.

"After filling the bearish April 7 gap caused by the US-Iran ceasefire, markets initially faded the DXY back toward the 50-day SMA now at 98.93. Ideally this holds to form a higher low and shift focus to weekly neckline resistance at 100.38, then the top of the year-long range at 100.64. A breakout above these levels would confirm a weekly base in favor of upside toward 103," BofA notes.

"However, the DXY's weak close on May 28 suggests another test of the 200-day SMA at 98.59 is possible. A hold and turn higher from there would still preserve a higher low versus early May and sustain the near-term uptrend. A close below 98.59 would weaken the bullish setup. The 61.8% Fibonacci retracement at 97.50 remains critical support to preserve the bullish base case for DXY," BofA adds.