The market may revert to dip buying in USD/JPY as central bank risks loom and intervention odds remain high.

Fresh FX warnings pushed the pair toward its 159.37 Tenkan-sen, but large option-related gamma is limiting downside and helping anchor spot just below 160, supported by higher oil and Treasury yields.

While heavy short yen positioning, a flattening JGB curve, and softer technicals -- including a thinning daily cloud -- leave room for a pullback, a clear catalyst is lacking. Moreover, BOJ Governor Kazuo Ueda struck a cautious, mildly hawkish tone that offers limited support for sustained yen strength. While highlighting risks of inflation overshooting and falling behind the curve, he stressed the need to carefully weigh further tightening with policy still highly accommodative. This balanced stance echoes past messaging and aligns with government growth priorities, providing little conviction for a durable yen rally unless higher yields undercut risk sentiment. An extended move above 160 might invite MOF intervention, particularly if the yen weakens after an expected June BOJ hike. The options market is already pricing both that risk and a potential shift into a sustained 160+ range once expiries and key events pass. A close below 158 may be needed to arrest bullish sentiment.
yen


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

Societe Generale Research discusses the scope for further waves of intervention by Japan's MoF to cap USD/JPY upside.

"Neither rate trends, nor growth prospects are pointing to a sustained yen recovery yet. The Bank of Japan has now spent something in the order of USD 240bn in FX intervention to cap USD/JPY, since mid-2022. USD/JPY has averaged 147 over that period. Given that at that price the yen has been, on average, 35% undervalued relative to purchasing power parity, this represents a huge effort to avoid something that once upon a time, economists thought could only happen temporarily. The challenge for the MOF and BOJ, is that despite 2-year JGB yields rising to their highest level since 1996, that’s still 2.7% below Treasury yields. The 1-year yield differential has narrowed, from above 4% to below 2%, but it too, remains big enough to keep Japanese investors in Treasuries. There is, therefore, a danger that the current unstable equilibrium (super-cheap yen, rising Japanese yields) can be sustained for a while longer," SocGen notes.

"It is much easier to imagine a significant yen revival in the event of a protracted period of slow (or no) US growth, than in imagining Japan can grow fast enough to life the yen on its own. In short, for now, intervention to cap USD/JPY is likely to continue but hoping for a turn in the USD/JPY trend, back towards 150 and beyond, is unrealistic," SocGen adds.

Goldman Sachs Research previews the US May jobs report on Friday.

"We forecast a 60k increase in payrolls (vs. 89k consensus) in May. Big data indicators of job growth slowed, and government is likely to be a 5k net drag. We expect the unemployment rate to remain unchanged at 4.3%," GS notes.

"While continuing claims have fallen further, the unrounded unemployment rate was 4.34% in April, and the May unemployment rate appears to suffer from modest positive residual seasonality. We forecast a 0.4% increase in average hourly earnings, reflecting positive calendar effects," GS adds.

• Cable has traded a 22.5 pip range since the London open; 1.3439 is session low

• 1.3407-1.3485 marks the traded range since Friday (May 29)

• UK May services PMI upwardly revised to 49.3, from 47.9 flash estimate

• Five-year gilt yields rise to their highest level since May 22

• U.S. May ADP jobs data, ISM services index ahead; 117k and 53.8 forecast

• May 3, 2029 is one of the most likely dates for the next UK general election

GBPUSD


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

(Adds option expiry link to line 5 )

• EUR/USD is lacking volatility within limited ranges without a fresh catalyst, but options play their part, too

• Low volatility prompts option selling and adds more strikes to a zone already containing large amounts

• More strikes means more related cash hedging flows to offset exposure, which further restricts EUR/USD ranges

• There's been billions of euros of nearby expiry strikes expiring over recent sessions and more to come

• Wednesday has a massive 6.5 billion euros between 1.1600-55 for the 10-am New York cut expiry

• Thursday has 2.5 billion euros each at 1.1570 and 1.1600 and 6-billion euros between 1.1620-50, More Friday, too

• EUR/USD is leaning more bearish and options react, but still lacking conviction
EUR/USD FX option strkes expiring June 1-5


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

• Spot gold is edging closer to a critical support level, with a daily close below potentially opening the door to deeper losses

• The 200-day moving average sits at $4,417.54 (EBS), a level gold has not closed below since October 2023

• A fleeting dip below the 200-dma on May 28 saw prices bottom $4,367.40, before a swift recovery back toward the 21-dma at $4,595.10

• Despite the brief bounce, gold remains under pressure, trading within a narrow $4,496.20–$4,452.90 range on June 3

• With gold edging ever closer to the 200-dma, traders will be watching closely — a close below could signal a more significant shift in trend
XAU=EBS


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

• EUR/USD FX option implied volatility languishes at 2026 lows amid low FX realised volatility in limited range

• However, benchmark 1-month expiry just paid 5.125 from 4.95 Tuesday as spot setback aids support for now

• Risk reversals edge higher for EUR puts over calls too - 1-month 25 delta paid 0.35 Wednesday vs 0.25 Tuesday

• Shows market is growing more wary about EUR/USD losses and is increasing related option prices

• Demand for downside strikes increasing too - buyers of 1-2-week 1.1550 strikes noted early Wednesday

• However, prices and demand still low by comparison to spike highs at start of Mid-East conflict in early March

• Recall 1-month implied volatility reached 9.0 and 1-month risk reversals 1.5 for EUR puts over calls

• Hedging of more large FX option strike expiries may help to contain through 10-am New York cut expiry

• Related comment - USD/JPY options breakout warning as volatility premiums surge
EUR/USD FXO implied volatility


EUR/USD 25 delta risk reversals


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

• Yen languishes at key 160 level as Gulf hostilities boost dollar

• USD/JPY has risen from 159.82 to 160.00, on Wednesday, EBS data show

• Japan warns as traders push yen to intervention zone before key BOJ speech

• Finance Minister Satsuki Katayama signals readiness to act on FX

• USD/JPY options spike higher, poised for FX breakout

• 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 156.59-159.04 region

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

Daily Chart


Correlation Chart


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

• Cable falls to 1.3439 as higher oil prices on Gulf hostilities inflate safe-haven dollar

• 1.3439 is the lowest level since Monday (1.3407 was the low that day)

• Tuesday high was 1.3481. UK May final services PMI due at 0830 GMT; 47.9 forecast

• Hawkish Greene comments suggest she'll soon join Pill in voting for BoE rate hike

• Majority of MPC, including Bailey, look set to vote for BoE rate hold on June 18

• Warsh pledges to follow the best of Fed's traditions, while also looking for change

GBPUSD


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

• USD/JPY trades 160.00 - many exotic option barriers/triggers at that level now expired or knocked-out

• The related long gamma weighing option premiums and helping to contain FX, is now much reduced

• Implied volatility spikes from recent/4-year lows - benchmark 1-month expiry now 7.0 from 6.3

• Most telling is 1-month 10 delta butterfly spread from 1.2 to 1.6 - new high since 2022 (was 0.6 early May)

• Holders profit from USD/JPY breakout in either direction. Risk reversals strong bid for JPY calls over puts 1.2

• JPY calls benefit from lower spot and higher implied volatility - the USD/JPY spring is coiled
USD/JPY FX option implied volatility


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


USD/JPY 25 delta risk reversals


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

• USD/JPY, JPY crosses back off from early Asia highs as longs booked profits

• USD/JPY from 160.00 early to 159.82 before steadying

• Japan FinMin Katayama FX intervention threat today taken more seriously

• That said, good demand on dips, Japan importers good buyers every Tokyo fix

• Specs also good buyers on dips after rallies

• Foreign investor hedging of Japan equity buys also tipped

• Technically, USD/JPY pulling away from 156.59-159.03 daily Ichimoku cloud

• Cloud also looking to taper, fall, to 157.86 over course of week

• Hourly chart shows support from 159.83 Ichimoku kijun, cloud 159.43-63 below

• Massive option expiries in area to help contain spot action ceteris paribus

• 159.00-70 total $1.2 bln, 159.75 $1.7 bln, 159.90-160.00 $901 mln

• EUR/JPY 185.92-186.00 EBS, at top of 184.39-186.14 daily Ichimoku cloud

• Like USD/JPY, EUR/JPY cloud to taper, fall to 184.95-185.03 over week

• Support from 185.80 hourly Ichimoku kijun, ascending cloud 185.45-63 below

• Some option expiries nearby today at 185.00, 185.40 strikes

• CHF/JPY 203.23 to 202.75, down more from 204.18 recent high May 29

• Pulling away from hourly Ichimoku cloud topside between 203.03-32

• GBP/JPY 215.06-37 and down from 215.52 high yesterday

• AUD/JPY too off some from 114.91 high yesterday, Asia 114.57-85

• NZD/JPY in lower 94.64-87 range after rally to 95.42 Monday

• BOJ Ueda to speak later today, could communicate rate hike

• In news, Japan finalised extra budget to subsidise surging fuel

• In data, Japan May services PMI 50.0, composite 51.1

• Nikkei index to fresh record high of 68,561.60, JGB yields up across curve

• Related comment , also ,
USD/JPY hourly:


Nikkei 225 daily:


Yield on JGB 2s - hourly:

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

• Shares of 49 Metals rise as much as 32% to A$0.165, their highest since April 29

• Gold explorer discovers high grade gold at Gold Mountain project in Nevada, USA

• About 2.2 million shares change hands, 11.8x the 30-day average

• Stock down nearly 24.2% as of last close from March 31, its first day of ASX trading

(Reporting by Sherin Sunny in Bengaluru)

• AUD/USD -0.1% Wed after growth slows in Q1 and Middle East trouble flares

• AU Q1 real GDP +0.3% q/q (poll +0.5%), +2.5% y/y (poll +2.6%)

• RBA officials Bullock, Hunter & Kent appear before Senate Committee 0500 GMT

• Iran hostilities rekindled as U.S. intercepts regional missile attacks

• Israel's strikes on Lebanon continue U.S.-mediated partial ceasefire

• AUD unlikely to break 0.7080-0.7200 channel without fresh catalyst

• Range Asia 0.71715-815, 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 up to 159.99 EBS yesterday and 159.88-160.00 so far in Asia

• Intervention signal flashing red as Japan FinMin Katayama ready to act

• Katayama won't comment on specific FX levels but says will act appropriately

• Agrees with BOJ Gov Ueda on various issues, inflation impact of weak yen?

• Maybe agreement too on BOJ rate hike at June 15-16 Policy Board meeting

• 160.00 seen line in sand by market for Japan FX intervention currently

• Rises above could see action at any time

• Tech support at 159.37 daily Ichimoku tenkan, cloud 156.59-159.03

• Daily cloud to taper large from tomorrow to 157.86 over next week

• Hourly chart shows Ichimoku tenkan at 159.93, kijun 159.81, cloud 159.38-60

• Massive $1.7 bln option expiries today at 159.75, $1.3 bln below to 159.00

• Another $901 mln at 158.70, near current spot $901 mln between 159.90-160.00

• JGB-US Treasury 2-year rate diffs holding below recent highs around 263 bps

• Rate differential in 10s sharply wider from recent narrows to around 185 bps

• US-Iran impasse continues with reports of fresh incidents, crude prices high

• This to help keep USD bid alongside demand from many Tokyo players

• Related comments , , , also

• US markets , , ,

• On Katayama-speak , Fed , US economy

• On US-Iran , for more click on [FXBUZ]

USD/JPY:

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

• NZD/USD flatlines Wed, remains captive to broad geopolitical uncertainty

• NZ Q1 terms of trade -2.0% q/q (poll -2.0%), export volumes +2.7% q/q

• Q1 Import prices -0.7% q/q (poll 0.3%), export prices -2.7% q/q (poll -1.1%)

• Mixed U.S.-Iran signals persist; oil hits 1-week highs on growing scepticism

• Israel continues to attack Lebanon despite Trump-mediated partial ceasefire

• NZD drift lower toward 0.5815 support likely to continue without new impetus

• Range NZ 0.59235-295, 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.)

• AUD/USD +0.3% late Tue but markets wary of Middle East developments

• AU Q1 real GDP 0130 GMT, Reuters poll consensus +0.5% q/q, +2.6% y/y

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

• Israel continues to strike Lebanon despite U.S.-mediated partial ceasefire

• Confused U.S.-Iran messaging persists; Hormuz remains effectively closed

• AUD unlikely to break 0.7080-0.7200 channel without fresh catalyst

• Overnight range 0.7168-87, 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.)

JP Morgan Research flags CHF positive seasonality for the month of June.

"Tactically, we are conscious of franc-positive seasonality in June associated with bank balance sheet expansion (similar dynamic to December; Figure 5 in European FX year-end seasonality: Krona takes the crown, Popescu). This seasonality appears in the last week of May and until the end of June and is most apparent vs USD (USD/CHF has fallen by a median of 1.2% in 13/15 years)," JPM notes.

"Our trade construction vs NOK is affected less consistently (in 11/15 years with the past decade particularly mixed), but it is still a force to be mindful of," JPM adds.

• GBP$ hovers near flat at 1.3461 in NY afternoon trade; Tuesday range 1.3482-1.3452

• Pair off early NorAm high 1.3480 as UST yields rise off session low, oil higher

• Cluster of daily MAs between 1.3477-92 (100/21/30) cap trading, for now

• Conflicting headlines on peace progress stall risk rise; Iran downplays talks

• BoE's Greene: case for hiking rates grows as conflict wears on; tightening may be necessary

• BoE's Bailey: we've got to give public confidence that 2% inflation target is real

• GBP$ res 1.3481 Tuesday high, 1.3492 the 30-DMA, 1.3509 daily high May 25

• Supt 1.3448 bruised 10-DMA, 1.3423 flat 200-DMA, 1.3349 lower 30-d Bolli

GBP Chart:


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

• NY opened near 1.1645 after 1.1621 trade din Asia, the pair rallied early

• Softness in USD, US yields , oil helped EUR/UD hit 1.1656

• Sellers then emerged as USD, yields firmed & oil turned up on the session

• Erosion of some gains in gold, silver and stocks helped add weight on EUR/USD

• The pair turned lower on the session, hit 1.1621, was down -0.09% late in the day

• Daily inverted hammer formed after EUR/USD neared the 55-DMA

• Drop below the 10-DMA & falling daily, monthly RSIs are concerns for EUR/USD bulls
eurusd


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

• NY opened near 0.7180 after 0.7153 traded overnight, pair slid toward 0.7165 early

• Buyers emerged however as USD, US yields & oil traded softly

• Rallies in gold, silver, copper & equities helped buoy risk sentiment

• AUD/USD rallied to 0.7187 then gave back some gains, neared 0.7175 late

• USD, yields firmed up & USD/CNH rallied towards flat on the session

• AUD/USD remained above the 10-DMA and was up +0.17% late in the day

• Rising daily RSI, hold above the 10-DMA gives bulls some confidence

• Hold below the 21-DMA and resistance near 0.7200 are concerns however
audusd


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

MUFG Research discusses EUR/USD outlook and expects limited downside in the near-term targeting the pair at 1.15 by end of June before recovering towards 1.18 in Q3 and 1.20 by year-end.

"The 2-year EU-US swap spread fell by a substantial 37bps in May and in that context EUR/USD fell relatively modestly. This was in part down to the ECB being more explicit on plans for monetary tightening. Most of the communication from ECB officials pointed to an intention to hike rates in June.," MUFG notes.

"With ECB tightening now well priced, the upside momentum has faded and given the backdrop of continued uncertainties over the conflict in the Middle East, near-term downside EUR risks remain. However, assuming a deal is finally reached, we see EUR/USD recovery unfolding in the second half of the year," MUFG adds.

• Cryptocurrency and blockchain-related stocks drop on Tues, as bitcoin extends losing streak to three days

• Bitcoin, world's largest cryptocurrency, falls 5.9% to $67,185.38, lowest since Apr 5; Ether down 4.7% to $1,909.38, a more than three-month low

• Crypto exchange Coinbase Global down >5% on the session

• BTC hoarder Strategy , which on Mon disclosed selling $2.5 mln worth of bitcoin, down 9.6% to lowest since mid-Apr

• Retail trading platform Robinhood Markets down ~4%

• Crypto miners Mara Holdings and Bit Digital

off 2% and 5%, respectively, while Riot Platforms

down fractionally

• Ether-linked stocks sag: Bitmine Immersion Technologies

~7%, Sharplink Gaming ~6%

• ProShares Bitcoin Strategy ETF and iShares Bitcoin Trust ETF both off >6%, while iShares Ethereum Trust ETF down 5%
(Lance Tupper is a Reuters market analyst. The views expressed are his own)

Bank of America Global Research flags a scope for AI-linked inflows to support GBP over the medium-term.

":Whilst investors have remained focus on the UK's fragile public finances, the second part of the "dual deficit" narrative, the balance of payments, has been largely overlooked. Admittedly, whilst global balance of payments data has been impacted by several shocks over the past decade, the UK's issues date back to Brexit amid question marks over the attractiveness of the UK as an FDI destination," BofA notes.

"Yet, as the AI revolution is still seen as a US phenomenon, the UK has emerged as an attractive destination for AI-linked inflows on top of well-established financial services and biotech influx from overseas. Whilst this may not immediately translate into a healthier BoP position, it perhaps provides a reason why GBP has been resilient against the backdrop of ongoing political uncertainty. Further out, a higher productivity/capital intensive mix of FDI inflows should be seen as a medium-term positive for GBP valuation trends," BofA adds.

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)