Credit Agricole CIB Research maintains a short AUD/NZD position in spot targeting a move towards 1.16.

"The US and Iran grinding towards a deal to re-open the Strait of Hormuz is also weighing on oil prices and unwinding some of the terms of trade shift in favour of the AUD over the NZD. Importantly, even if a US-Iran accord is reached, there is a fair amount of inflation baked into the Australian and NZ economies, which both central banks will have to respond to. But the RBA is ahead of the curve, having raised rates three times already, and the RBNZ must play some catch up.

"The hawkish pivot by the RBNZ combined with softer Australian inflation is eroding the RBA-RBNZ rate divergence. Even today, NZ data pointed to bounces in business and consumer confidence in May, reducing one of the key reasons cited by internal RBNZ MPC members for resisting a rate hike this week while external members voted for a hike," CACIB notes.

"We continue to think there will be a grind lower in the Australia-NZ short-term rates differential back to its over 30Y average, bringing AUD/NZD likewise back towards its 30Y average of 1.16. The relative shift in the terms of trade advantage between Australia and NZ will also be a factor driving the exchange rate lower. We remain short AUD/NZD," CACIB adds.

ANZ Research discusses JPY outlook and the scope for anther wave of Japan's MoF intervention.

"USD/JPY is holding near 160, keeping intervention risk in play. Intervention can smooth the pace, not change the trend. A durable move in the JPY needs more credible BoJ normalisation and lower energy prices. Official rhetoric has had limited impact, and demand for upside USD/JPY protection has increased as spot approaches prior intervention levels," ANZ notes.

"Recent BoJ communication has been incrementally more hawkish, and the June meeting is now live. JPY weakness is feeding into inflation expectations, long-end JGB yields and the domestic political cost of staying too accommodative. But the macro backdrop is not yet strong enough on its own to deliver sustained JPY strength. A June hike, or a more hawkish signal from Governor Ueda, would strengthen the medium-term case for JPY. The BoJ meeting on 15–16 June is key. A hike with hawkish guidance may support a JPY rally, but this also will have to go hand in hand with energy prices moving lower reducing the negative terms of trade shock that is weighing on both the JPY and domestic fiscal spending plans," ANZ adds.

• AUD/USD traded a tight 0.7170-0.7150 range overnight, NY opened near 0.7160

• Pair was down -0.06% despite drops in US yields & USD/CNH

• Rallies in gold, silver and equities could not inspire AUD/USD bulls

• Investors sidelined as they are likely waiting for Pres. Trump's decision on Iran deal

• Should the President agree the deal risk-on may ensue & AUD/USD might rally

• Monthly doji, falling monthly RSI are concerns for AUD/USD bulls

• Pair's hold above the 10- & 55-DMAs and the daily cloud give bulls some comfort
audusd


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

• Yen going nowhere fast, ranges compressing (158.98-159.38) with conviction remaining low

• Japanese FinMin back on the wires reiterating readiness to act against FX volatility

• USD/JPY holds comfortably above the daily cloud (156.52-158.87) - technically constructive

• Sideways drift looks set to continue in the near-term

• Dips remain well-supported as the preference for carry persists

• Aside from cloud support, the 100DMA (157.68) offers a cushion. Resistance = 160
USDJPY daily chart


Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

• Cable marginally softer this morning, price action remains choppy with no clear signs of letting up

• Spot caught a bid Thursday on U.S.-Iran ceasefire extension headlines, but move lacked follow-through

• No conviction on either side, which leaves the pair in a sideways chop

• 200DMA (1.3423) acting as a magnet for now, though bias tilts lower from here

• Recent soft UK data has trimmed BoE hike pricing

• UK politics also a slow-burn risk - June 18 by-election worth keeping on the radar as we near event

• Support: 1.3350-70. Resistance: 1.3485-1.3500
GBPUSD daily chart


Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

• A wealth of USD/JPY exotic options - barriers and triggers from 160.00 - are set to expire next week

• The market is consequently awash with related gamma - evidenced by tight FX ranges and low implied volatility

• USD/JPY FX option implied volatility trades its lowest levels in 4-years - benchmark 1-month expiry just 6.3

• Yet below the surface calm, low delta strike premiums have been increasing - a warning sign that many might miss

• Butterfly spreads, which measure low-delta wing premiums relative to ATM implied volatility, have stretched to extremes

• One-week expiry 10 delta butterfly spread trades 2.4 - the highest level in 6-years - flagging a market wary of sharp moves

• Owning these options would benefit holders if USD/JPY were to break-out and volatility spiked

• If those 160.00 barriers are taken out before expiry, that's exactly what could happen
USD/JPY FX option implied volatility


USD/JPY 1-week expiry 10 delta butterfly spread


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

• Positive headlines to end Mid-East conflict are risk friendly and a weight on USD - supporting EUR/USD

• However, while negotiations continue and the Straight of Hormuz remains closed, economic concerns grow

• EUR/USD only matched Wed's 1.1661 peak after Thursdays ceasefire agreement - bulls yet to force a breakout

• A close above 55-dma 1.1654 and more important 200-dma 1.1682 would embolden buyers

• Daily cloud 1.1647-1.1702 adds to resistance, while support rests at recent daily lows 1.1586-77

• FX options endorse the situation - implied volatility at lows since Jan and lacks meaningful directional risk premium

• The hedging of more huge FX option expiries is also helping to shackle EUR/USD of late
EUR=EBS


EUR/USD FXO implied volatility


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

• FX options expire at 10am New York/15:00 GMT on Friday May 29

• EUR/USD: 1.1575-80 (1.1BLN), 1.1600 (1.5BLN), 1.1615-25 (1.1BLN), 1.1650-55 (2.4BLN)

• 1.1660-70 (560M), 1.1675 (246M), 1.1700 (1.2BLN)

• USD/CHF: 0.7840-55 (508M), 0.7875-80 (260M), 0.7900 (620M), 0.7910-20 (420M)

• EUR/GBP: 0.8650 (205M), 0.8700 (316M)

• GBP/USD: 1.3390-1.3400 (703M), 1.3480-85 (873M), 1.3500-15 (440M)

• AUD/USD: 0.7090-0.7100 (1.2BLN), 0.7115-25 (2.9BLN), 0.7140 (380M), 0.7155 (621M)

• 0.7175 (882M), 0.7200-10 (1BLN)

• USD/CAD: 1.3775 (262M), 1.3790-1.3800 (370M), 1.3850-65 (492M), 1.3895-1.3900 (724M)

• USD/JPY: 158.45-50 (1BLN), 159.00 (581M), 160.00 (762M)

• EUR/JPY: 185.00 (300M). AUD/JPY: 113.00 (395M)(Richard Pace is a Reuters market analyst. The views expressed are his own)

• GBP/USD unchanged in Asia pending confirmation of Iran ceasefire extension

• Supported by buoyant risk appetite on Iran deal hopes, surging tech stocks

• Fed rate hike expectations, U.S. inflation concerns limit GBP upside

• Fed policymakers eye rate hike scenarios as AI debate deepens

• UK pledges 300,000 youth placements after 'lost generation' warning

• UK business sentiment edges up in May, Lloyds says

• Support 1.3400-05, 1.3370-75, resistance 1.3450-60, 1.3500-10

• Thursday range 1.3368-1.3450, Friday 1.3433-1.34485
Where U.S inflation is heading: choose your yardstick wisely:

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

• EUR pairs for the most part better bid in pre-weekend Asia trading

• EUR/USD 1.1644-57 EBS in Asia after push up to 1.1661 yesterday

• To base of 1.1649-1.1702 daily Ichimoku cloud

• Still holding above now descending hourly Ichimoku cloud between 1.1628-35

• Large option expiries today to help contain spot action again

• 1.1595-1.1600 E1.7 bln, 1.1615-30 E1.2 bln, 1.1650-95 E3.4 bln

• Also between 1.1700-50 total E3.2 bln in expiries today

• EUR/JPY 185.51-64 EBS, around top of 185.21-52 hourly Ichimoku cloud

• In middle of now tapering daily Ichimoku cloud between 184.37-186.21

• Some option expiries today at 185.00 strike below

• EUR/GBP 0.8664-66 following push up to 0.8673 yesterday

• Still on hold below 0.8679 descending 100-DMA, 0.8684-0.8701 daily cloud

• Smattering of option expiries today on 0.87 handle

• EUR/CHF outlier and trading heavy, 0.9128-33 EBS, from 0.9170 high yesterday

• Towards base of 0.9123-88 daily Ichimoku cloud on pre-weekend haven flows?

• Related comments , , also
EUR/USD:


EUR/JPY:


EUR/CHF:

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

• AUD/USD flat Fri, activity subdued as markets weigh U.S.-Iran peace progress

• AUD recovery likely to fade into weekend, 0.7184 resistance looms large

• Agreement to extend Iran ceasefire awaiting Trump's approval, reports say

• Iran says no agreement has been reached; Strait of Hormuz remains in limbo

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

• Range Asia 0.7162-695, support 0.7080 0.6834, resistance 0.7184 0.7283
AUD Daily 55-DMA

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

• USD/JPY has seen little movement past 2 weeks, to around 159.00, just above

• Asia so far today 158.98-159.29 EBS, off from 159.65 high yesterday

• Japan FX intervention threat helping to limit the upside despite good demand

• View BOJ to hike in June also helping to keep lid on pair

• Demand good though - Japanese importers, foreign investor equity buy hedges

• Specs including Mrs Watanabes also have been buying dips, selling on rallies

• USD/JPY looks to remain relatively buoyant today as wont ahead of weekends

• Month-end flows largely seen done but some left-overs could affect action

• Option expiries supportive? 158.00-35 $1.4 bln, 158.40-159.00 $2 bln

• Smaller but also today 160.00 $762 mln, 161.00 $615 mln topside

• JGB-US Treasury 2-year interest rate differentials wider around 270 bps

• Differential in 10s up from recent lows around 181 bps

• This despite moves lower in US yields overnight, JGB yields easier too

• US yield decline in light of high inflation data surprising?

• Seems hopes of US-Iran deal trumping data, crude oil prices mixed

• Related comments , , also

• US markets , , ,

• On US data , on Fed , ,

• 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 +1.4% from Thur 0.5865 low on Iran hopes & hawkish RBNZ comments

• RBNZ policy committee member Gourley expects OCR hike sooner than later

• NZ government budget passes down budget light on fiscal stimulus

• Sources claim U.S. & Iran agree to extend ceasefire, Trump's approval needed

• Iran refutes agreement, which supposedly includes easing Hormuz restrictions

• U.S. Apr core PCE +0.2% m/m (poll +0.3%), +3.3% y/y (poll +3.3%)

• NZD extends beyond recent 0.5888 top, looks bound for 0.5991 resistance zone

• Range NZ 0.59295-455, support 0.5815 0.5680, resistance 0.5991 0.6012
NZD Daily 55-DMA

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

• AUD/USD +0.9% from Thur 0.7098 low as risk sentiment improves on Iran hopes

• Sources say U.S.-Iran agreement to extend ceasefire awaits Trump's approval

• Iran denies agreement, which reportedly includes eased Hormuz restrictions

• AUD resistance near 0.7184 tough to break, drift lower likely in Asia

• U.S. Apr core PCE +0.2% m/m (poll +0.3%), +3.3% y/y (poll +3.3%)

• Overnight range 0.7108-70, support 0.7080 0.6834, resistance 0.7184 0.7283
AUD Daily 55-DMA

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

Danske Research discusses EUR/GBP outlook and targets.

"EUR/GBP has been caught between two opposing forces with the poor risk sentiment putting upward pressure on the cross, amplified by an increasingly challenging political landscape in the UK with focus on leadership challenges within the Labour Party. On the other hand, while the UK is still a net-energy importer akin to the euro area, the energy mix in the UK slightly favours a relatively stronger GBP vs EUR. If ceasefire talks prove effective, we expect the focus to return to fundamentals," Danske notes.

"We highlight that the UK economy remains fragile and see scope for a larger reversal of Bank of England repricing than for the ECB, opening for a move higher in EUR/GBP. We forecast EUR/GBP to rise towards 0.89 on a 6–12-month horizon," Danske adds.

• GBP$ +0.12% at 1.3444 in NY afternoon trade; NorAm range 1.3390-1.3450

• US core PCE prc index m/m below f/c, sapping hawkish Fed expectations

• US and Iran reach deal but need Trump's final approval - Axios

• Peace, more dovish Fed rate view is GBP-friendly, though UK political, fiscal concerns linger

• GBP$ res 1.3450 Thursday high, 1.3477 the flat 100-DMA, 1.3509 daily high May 25

• Supt 1.3407 daily base line, 1.3368 Thursday low, 1.3304 daily low May 18

GBP Chart:


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

• NY opened near 1.1605 after 1.1587 traded in Europe, pair rallied in early action

• USD, US yields slid, spreads tightened after PCE, claims reports

• Risk-on then dominated after report of a possible US-Iran ceasefire extension

• US yields turned lower, USD/CNH fell to 6.7710 and the USD was sold broadly

• Gold, silver and equities turned positive to reinforce the risk-on sentiment

• EUR/USD hit 1.1661 then dipped a bit, it traded up +0.23% late in the session

• Daily techs warn bears; RSIs diverged, trend line support held, bull hammer formed

• EUR/USD's rally above the 10- and 55-DMAs reinforces those bullish signs
eurusd


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

• NY opened near 0.7115 after 0.7098 traded in Europe's morning

• Pair rallied as USD, yields softened after PCE, jobless claims

• Rally intensified on report US-Iran might extend ceasefire for 60-days

• USD fell sharply, yields turned lower, USD/CNH hit a fresh 3-1/4- year low

• Gold , silver , stocks rallied to reinforce risk-on sentiment

• AUD/USD rallied above the 10-DMA, hit 0.7170, was up +0.34% in NY's afternoon

• Daily RSI diverged on today's low and a daily bull hammer candle formed
audusd


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

Credit Agricole CIB Research discusses the scope for another wave of Japan's MoF intervention.

"USD/JPY has unwound a bit over three-quarters of its intervention driven decline. Importantly, the rally back in the exchange rate has occurred despite a fall in oil prices as investors continue to optimistically price in a US-Iran deal. Admittedly, this optimism has been tested lately as the two sides have exchanged fire while both also say talks are proceeding. But oil prices are still significantly lower than they were before the BoJ/MOF's FX intervention," CACIB notes.

"Relative rates have been a significant driver of the move higher in USD/JPY, however, as US economic data has held up well and Japan's rates market has backed away little from pricing in a June rate hike by the BoJ. While BoJ Governor Kazuo Ueda yesterday warned that higher oil prices could change the dynamic of Japan's inflation noting that oil price rises do more than just push fuel prices higher in Japan, he stopped short of indicating what this meant for monetary policy. We continue to think that when it comes to relative rates, the bigger driver of USD/JPY is the US rather the Japan side of the equation. This dynamic would only change in the unlikely event of a hawkish hike by the BoJ," CACIB adds.

MUFG Research discusses the scope for further correction in AUD/NZD.

For approaching a year now, the fundamental backdrop for AUD/NZD clearly favoured the upside. From the closing level at the end of June last year, AUD/NZD advanced by 13.75% to the closing high on Tuesday – a very sizeable move in a little short of eleven months. The closing high on Tuesday was the highest close since April 2013," MUFG notes.

"Since June last year, the AU-NZ 2-year swap spread has surged from 25bps to a high of 160bps in April...The RBNZ meeting yesterday potentially marked a turn in that spread, which is likely to see some of that near 14% gain in AUD/NZD reverse. The RBNZ made clear that a hike was coming and the split 3-3 vote that kept the policy rate unchanged at 2.25% (Governor Breman’s vote to hold swung the decision) was accompanied with a communication of hikes to come. We see a hike at the next meeting in July, which is not yet fully priced at 20bps...If the recent move lower in AUD/NZD reflects a turning point in rate spreads, the historical narrative would suggest that this is the beginning of a broader corrective phase rather than a short-term positioning adjustment," MUFG adds.

The near-term outlook for sterling suggests continued volatility, with several factors poised to influence its trajectory, including relative U.S.-UK inflation expectations, the lingering Middle East conflict and UK political uncertainties.

Sterling saw a bump up today, rising from session lows below 1.34 after the U.S. monthly core PCE inflation showed an unexpected deceleration. This data somewhat eased expectations for aggressive Federal Reserve policy in December, though it's only one month's worth of data.

Tensions in the Middle East remain the key guiding light for risk assets and are likely to tamp down on any bullish sterling moves, given lingering UK inflation, which is slated to keep the BoE on a decidedly hawkish path in H2 2026, which will likely inhibit UK growth in the near-term.

There is also the specter of UK political uncertainty, all of which is likely to keep GBP/USD from moving above recent trend highs near 1.35, barring a definitive Iran peace headline or a surprise reduction in UK inflation.

Technically, the pair is navigating crucial thresholds; solid downside support is established at today's flash low of 1.3368, followed by the lower daily Bolli at 1.3354. Conversely, stiff resistance is building overhead, first just above today's high at 1.3436 at the 50-DMA by 1.3444, and more critically around the 100-DMA at 1.3476 and the Monday and Tuesday highs just above 1.35.
GBP$ Chart:


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

Bank of America Global Research highlights the reading from its month-end fixing model.

"We estimate FX rebalancing needs based on a conventional 60/40 portfolio of global equities & bonds. Our estimates reflect broadly an outperformance of EM denominated assets over May (and to a lesser extend USD assets), and relative underperformance of GBP, EUR and JPY denominated assets," BofA notes.

"This underperformance implies scope for rebalancing flows out of EM (-0.9σ) + to lesser extend USD (-0.2σ), and into GBP, EUR & JPY with Z-Scores c.+1.1σ, +0.9σ & +0.8σ, respectively)," BofA adds.

Goldman Sachs Research sees a scope for further USD strength in the near-term on restricted energy flows.

"The latest set of data help demonstrate that, other things equal, each day of restricted commodity flows is incrementally positive for the Dollar. We believe that some of the recent underperformance in European currencies, and sharper move in DXY, reflects the concern that a longer disruption will start to more significantly constrain activity in the region," GS notes.

"We think this is an important and likely durable shift in market dynamics that are increasingly reflected in the Dollar rather than being limited to shifts in relative value pairs. Recent moves give USD more room to sell off on risk relief, or renewed tech sector concerns, but we think as long as energy flows remain restricted there is building and broadening appreciation pressure on the Dollar," GS adds.

• 0.7145 traded overnight, sellers emerged as risk sentiment soured

• The latest reports on the conflict with Iran drove risk-off trading

• USD, US yields , USD/CNH & oil rallied on the reports

• Gold , silver , equities sank to reinforce USD buying

• AUD/USD fell to 0.7098, neared the 55-DMA before bouncing a bit

• NY opened near 0.7115, AUD/UD traded down -0.36% in early action

• Techs lean bearish; RSIs falling, pair trades below the 10- & 21-DMAs

• Monthly inverted hammer candle in place for May reinforces bear signs

• US April PCE, durable goods & weekly jobless claims are risks in NY
audusd


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