• USD/JPY broke well below 2023's 130.47 up TL intraday

• Short trade from 132.65 met its 130.05 objective

• Prices closed above the TL after a trend low Friday at 129.645 on EBS

• That low is near the 76.4% Fibo of 2023's 127.215-137.90 range at 129.74

• Big rebound that ensued is now is near the 130.935 session high

• A modestly oversold daily RSI bullish divergence supports

• But this week's 133 high at the weekly tenkan should weigh

• As well as the 21-, 30- and 100-DMAs, now converged at 134.32-46

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• USD/JPY tumbled to 129.645 on EBS in early risk-off maelstrom

• Dive on banking angst, Tsy yield plunge and broad haven yen buying

• Drop also sped by break of 2023's up TL, but dive reversed in NY

• Prices back above the TL at 130.48 amid 20bp 2-yr Tsy yield rebound

• As well as recover in equities that drained haven yen demand

• US PMI data and Fed speakers were supportive of the risk rebound

• That after Fed cuts of roughly 2% had earlier been priced in

• USD/JPY remains below the thinning and rising daily cloud

• And with this week's 133 high right at the weekly tenkan

• Would need to close above 133 to soften the bearish bias

• If bank-related derisking resumes, 2023's 127.215 lows are doable

• Eyeing IMM spec positioning to see what's left of big USD/JPY long

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• Banking stress which may drive a credit crunch lead to risk-off trading

• Rates SRAU3EDU3 fell while US$ & yen rallied due to a flight to safety

• USD/CNH rallied toward 6.8850 & AUD/JPY hit a 1-year low near 86.05/10

• Equities ESv1 & commodities HGv1 fell in sympathy with risk-off

• AUD/USD opened NY near 0.6640, fell to 0.6625 but failed to fall further

• US$ buys abated while AUD/JPY, equities, commodities bounced off the lows

• AUD/USD neared 0.6650, sat nearby late, traded down -0.59% in NY's afternoon

• Techs lean bearish; RSIs imply downside momentum, pair below 10- & 21-DMAs

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MUFG Research maintains a bearish bias on USD/JPY in the near-term.

"We continue to see a lower USD/JPY as the most likely scenario as we move forward from here.

The scale of easing now priced for this year (Dec ’23 fed funds future at 4.10%) leaves the US dollar vulnerable and we are likely to see USD/JPY trading down to the ytd lows between 127-128 relatively quickly," MUFG notes. 

• AUD/JPY fell 1% amid global risk-off flows hitting AUD, boosting yen

• Aussie is seen as a risk proxy and yen a safe-haven currency

• Prices this week tumbled below the 100-WMA after a clear cloud break

• Fri's 86.09 low is below 61.8% of 78.79-98.39 & 2021's peak @86.28/24

• Prices now very far below the uptrend from 2020-21 lows at 93.10

• And the 2020-22 pandemic rally peaked with a big bearish RSI divergence

• The now falling 30-WMA capped Jan, Feb and March rebound attempts

• A close below the 86.28/24 levels would eye the 76.4% Fibo @83.42

• The bigger objective is the pivotal 200-WMA at 81.52

• This slide will last until the banking crisis abates

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ANZ Research looks to buy EUR/GBP on dips and sell AUD/USD on rallies. ANZ target entry level for EUR/GBP is 0.8700, and for AUD/USD is 0.6800.

"Relative inflation dynamics and central bank pricing support a ‘buy on dips’ approach to EUR/GBP," ANZ notes. 

"Australia’s economic momentum is insufficient to close the policy gap that has opened to the rest of the world. This makes it difficult to hold a positive bias in the AUD against the USD," ANZ adds. 

EUR/USD came under pressure on Friday as banking stress concerns lifted safe-haven assets, but as long as markets foresee central bank policy diverging in the euro's favor, the outlook will remain bullish.

Though bank fears triggered knee-jerk euro selling, they also heightened the interest rate trends that are EUR/USD supportive -- particularly the massive repricing of Fed policy expectations.

The dollar is facing a major headwind as SOFR SRAU3 and Eurodollar EDU3 remain near recent highs following sharp rallies, with Fed rate cuts projected as early as Q2 2023 and continuing until Q3 or Q4 2024.

Euribor futures FEIZ3 prices have not risen as sharply, with ECB cuts projected to be less aggressive than Fed easing, which should prevent significant EUR/USD drops and possibly buoy the pair.

Meanwhile, technicals are sending mixed messages.
Daily RSI is falling and a drop followed Thursday's inverted hammer candle, but monthly RSI is rising.
Monthly charts also show the right shoulder of a large head-and-shoulders bottom forming.

On balance, EUR/USD longs are facing short-term risks to the downside, but longs may be rewarded if they can stomach a bit of turbulence.

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Bank of America Global Research discusses the USD outlook and expects the greenback to stay bid for some time.

"We have been arguing that it is not going to be a straight line for FX. The consensus has been expecting the reversal of last year's trends, with lower inflation, rate cuts and a weaker USD. We also expect a weaker USD eventually, as it remains overvalued. However, we have been arguing that the USD call is an inflation call for as long as the Fed remains focused on inflation, suggesting that sticky inflation will keep the USD historically strong for some time, despite some recent weakness," BofA notes. 

"Moreover, as G10 inflation paths diverge on the way down and central banks face different trade-offs between their three mandates, we are likely to see more FX divergence in the months ahead," BofA adds. 

Credit Agricole CIB Research warns from selling the USD before the official end of the current Fed hiking cycle.

"The recent banking sector turmoil has fuelled concerns about aggressive tightening of credit conditions and intensifying recession risks in the US. It has also forced the Fed to deliver a dovish rate hike in March, seen by many as pre-announcing the end of its tightening cycle in May," CACIB notes. 

"Our recent historical analysis of FX price action during the past six Fed tightening cycles since 1980 has suggested that investors should not sell the USD before the Fed is actually done hiking. Indeed, it seems that the combination of ongoing Fed hikes and intensifying recession risks tended to offer the USD a moderate boost on average" CACIB adds. 

EUR/USD traders should be wary of a purge of the many bets they have made on the pair rising which could result in a disorderly drop.

Traders have sat on bets that the pair rises since October and initially they did well, with EUR/USD rallying from 0.9528 EBS to 1.1034 last month.
Since then the situation has become far less certain with bets growing to a huge $22 billion in February and the pair falling to 1.0516 EBS before risk aversion during the turmoil surrounding the banking sector sparked a surge to 1.0930.

This has been swiftly followed by a drop to 1.0722. These swings should logically lead to a bigger reduction in exposure and therefore greater pressure on EUR/USD.

If traders continue to be swayed by officials' belief that there is no crisis to be worried about - and measures taken since 2008 are suffice to prevent one - then they may hold, or even gamble - heightening the risk of a collapse if these assumptions are wrong.

In uncertain times, it's prudent to reduce risk and if that can be done profitably, the decision is usually simple to make.
The 100-DMA at 1.0616 is possible trigger point for a sell-off.

Related comments nL1N35W0JUnL1N35W0L1

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• Palm oil drops MYR 4425 to MYR 3504 between Mar 2 and Mar 24

• Palm oil cheapest since Oct 2022

• In October 2022 palm fell to 19-month low at MYR 3220

• India, eurozone and China are big consumers of palm oil

• Indonesia and Malaysia are the biggest exporters

• Potentially less inflation for RBI and ECB to worry about

• Possible support for INR and EUR, weight for IDR and MYR

• Emerging market currencies worryingly overbought ahead reverse nL1N35W0L1

• EUR/GBP falls to 0.8796 as European bank share losses weigh on the euro

• Deutsche Bank shares tumble, default insurance costs shoot up nL8N35W1FO

• 0.8796 is two-day low (0.8864 was Thursday's two-week high, after BoE hike)

• European bank stress depressed EUR/GBP to 12-week low of 0.8719 last week

• German March mfg PMI miss is also negative for euro: 44.4 vs 47.0 forecast

• UK March PMIs due at 0930 GMT; services PMI f/c 53.0 vs 53.5 in February

• Traders have been paring a big bet on USD/JPY rising

• It's normal to see yen repatriated ahead Japanese financial year-end

• In April the disbursement of new investment funds usually spurs yen selling

• If risk aversion abates USD/JPY will appeal as a carry trade nL1N35V0F0

• Should risk aversion intensify USD will benefit as world reserve currency

• JPY currently appears safer because traders wisely reducing exposure

• Dollar may be starting next leg of its long-term rise nL1N35W0F8

• 
  

• Cable remains below 1.2300 despite big UK February retail sales data beat

• Up 1.2% MM vs 0.2% f/c. 1.2263 was Asian session base (as yen strengthened)

• 1.2263 was also Thursday's low, following 1.2336 high after BoE rate hike

• See: nL1N35V0JD. 1.2336 was five pips shy of seven-week peak pre-BoE MPA

• Bailey warns rates will rise again if firms hike prices - BBC nFWN35V29A

• UK March flash PMIs due 0930 GMT; services f/c 53.0, manufacturing f/c 49.8

• Cross failed at the daily cloud top Thurs, ahead of a 76.4% Fibo

• Our 0.8859 short play marginally on-side

• Cloud top at 0.8862 and retracement off the 0.8924-0.8719 drop at 0.8876

• A minor Fibo just below market at 0.8809: off 0.8719-0.8864

• Mild correction off the early Frid 0.8815 low

• Daily momentum increasingly negative and RSI neutral

• Drop under 0.8800 sees our stop lowered

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• EUR/USD opened -0.21% at 1.0832 after reversing from a 3-week high at 1.0930

• Tad heavy in Asia in 1.0818/39 range before settling around 1.0825

• EUR/JPY selling weighed as AXJ equities ease 0.5% in sluggish session

• EUR/USD still trending higher but momentum is weakening a bit

• The 5, 10 & 21-day MAs remain in a bullish alignment and tilt higher

• A break below the 10-day MA at 1.0732 would warn a top is forming

• Sellers are tipped ahead of 1.0950 with resistance at 2023 high at 1.1034

• Bias is for more strength while the 10-day MA holds

• For more click on FXBUZ

Credit Agricole CIB Research maintains its Fed call unhanged after yesterday's FOMC policy decision.

"We continue to forecast another 25bp hike at the 3 May FOMC meeting, resulting a terminal policy rate of 5.00-5.25%, and do not expect any rate cuts until 2024. This is consistent with Chair Powell’s remarks that rate cuts are not in the Fed’s base case," CACIB notes. 

"The market is pricing roughly 12.5bp rate increase, or a 50% probability of a 25bp hike, while forecasting around 75bp of easing in H223," CACIB adds. 

• AUD/USD opened at 0.6685 and traded off from 0.6690 to 0.6660

• After a quiet start, AUD/JPY fell from 87.50 to 86.68, over 0.7% lower

• AUD/USD dragged down and remained on the back-foot thereafter

• AUD/USD broke below the 10-day MA at 0.6675 to trade as low as 0.6660

• AUD/JPY selling likely spared by sluggish Asian equities

• The AXJ index fell around 0.5% despite positive lead from Wall Street

• A close below the 10-day MA opens the way for a test of 0.6564

• Stiff resistance has formed at the 200-day MA at 0.6758

• For more click on FXBUZ

• AUD/USD has fallen below 0.6670 on the back of AUD/JPY selling

• AUD/JPY down over 0.70% since the NY close as Tokyo selling

• AUD/USD is below the 21-day 0.6674) and is looking vulnerable

• A close below the 10-day MA opens the way for test of March 0.6564 low

• AUD/JPY trending lower as global growth concerns weigh on sentiment nL4N35V0C7

• For more click on FXBUZ

• GBP/USD -0.1% in Asia on failure to sustain rally to 7-week high in Ldn

• Undermined by rising speculation of a Bank of England rate hike pause

• BoE raised rates 25 bps Thursday, its 11th in a row, to quell inflation

• Viewed as a dovish hike as MPC says it expects inflation to fall faster

• Traders evenly split between chances of BOE 25bps hike in May or a hold

• Thursday range 1.2341-1.2262;resistance 1.2340-50, support 1.2250-60, 1.2220

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• EUR/USD opens -0.21% after failing to hold above 1.0900 on tow attempts

• It traded to 1.0930 before EUR/JPY selling capped and discourage longs

• It is still trending higher with 5, 10 & 21-day MAs in a bullish alignment

• Support is at 10-day MA at 1.0733 and close below would suggest top forming

• Sellers tipped ahead of 1.0950 - but break above targets 2023 high at 1.1034

• Bias is for higher in the short-term as long as the 10-day MA holds

• Diverging Fed-ECB expectations underpinning EUR/USD for now

• For more click on FXBUZ

• AUD/USD opens unchanged as growth concerns offset lower US yields

• It traded between 10-day MA (0.6666) & 200-day MA (0.6759) 2nd straight day

• The 10-day MA ascends to 0.6677 today and break would add pressure

• The 200-day MA comes in at 0.6758 and should be solid resistance

• Fall in US Treasury yields and growth fears sent AUD/JPY 0.50% lower

• AUD/USD bias is for lower, as global growth fears likely to persist

• A close below the 10-day MA at 0.6677 opens path to March 10 low at 0.6564

• For more click on FXBUZ

ING Research sees a scope for a USD bounce in the near-term.

"The dollar weakened on the back of the moderate dovish surprise by the Fed yesterday, and reluctance from the Treasury to consider an extension to the deposit insurance. At the same time, a new regional lender, PacWest is facing increasing turmoil on deposit outflows and First Republic’s rating was cut from BB to B by Fitch. So, with a market not trusting the more ambiguous Fed communication and the US regional banking crisis far from resolved, it looks like investor bias on the Fed may stay on the dovish side," ING notes. 

"This should translate into a continued bearish bias for the dollar, primarily against European currencies should the stabilisation in European sentiment continue. Still, we see a high chance of seeing small USD upside corrections on the way, rather than a straight-line USD depreciation," ING adds. 

• Our short technical trade from 132.65 is now running risk-free

• Prices broke below daily cloud & Wed's high was rejected by weekly tenkan

• Thursday's early low at 130.415 on EBS held exactly at 2023's uptrend line

• But the trendline from Jan-Feb lows was eventually pierced

• A close below it would open the way to retesting 2023's 127.215 trend lows

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