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By Christopher Romano  —  May 28 - 10:15 AM

After hugging the 200-DMA for most of today's trading nL1N2DA0VM, EUR/USD rallied to a 2-month high and further gains are probable.
Judging by the continued tightening of German-Italian spreads and EUR/USD's rally to 1.1040 on EBS, investors don't appear too worried about the tough negotiations facing the EU Commission's recovery proposal nP6N2CB025, which received a warm welcome from markets yesterday.
EUR/USD longs could also be looking at inflation expectations.
Euro zone 5-year/5-year inflation swaps EUIL5YF5Y=R rallied above resistance and traded at levels not seen since April 17.
EUR/USD options investors are increasingly expecting higher levels.
Risk reversals show vol premiums for 1-week and 1-month EUR/USD calls are higher than those for puts while 3-month put premiums over calls are quickly eroding.
Technicals highlight upside risks as daily and monthly RSIs rise, a monthly bull hammer is forming for May and EUR/USD is trading above the 200-DMA.
EUR/USD bulls have to contend with 1.1055/65 resistance where the March monthly high, daily cloud top and 50% Fibo of 1.1495-1.0636 sit.
Should EUR/USD longs overcome that impediment tests of 1.1145/50 and 1.1190/1.1200 resistance is likely.

eur/usd Click here

eur/inf Click here

eur/vol Click here

Refinitiv IFR Research/Market Commentary
By Randolph Donney  —  May 28 - 09:00 AM
  • Unexpected drop in continuing claims nAPN0E2KE1 bolsters USD/JPY

  • Treasury yields a couple bps higher, helped by durable goods beat

  • Pair in tight range below repeated highs, 61.8% Fibo at 108.085 EBS

  • Q1 GDP revised down -5% nAPN0E2KJL, but core durables beat nAQN02LBIL

  • Little reaction to rising China-U.S. tensions, Hong Kong nL4N2DA0NH

  • Risk trades generally consolidating after big gains ahead of month-end

  • USD/JPY bulls hope 108.085 tops, 38.2% & 200-DMA at 108.17/32 are cleared

  • Glacial uptrend unable to close below tenkan, now 107.57, since May 8

  • 30-DMA at 107.25 is likely guarding trend follower sell stops

Chart Click here

Refinitiv IFR Research/Market Commentary
By Christopher Romano  —  May 28 - 08:45 AM
  • U.S. weekly & continuing claims fall from prior report nAQN02LBA9

  • Q1 GDP below f/c nAPN0E2KJL, Apr durable good above f/c nAPN0E2KGT

  • Equities ESv1 add to gains; yen sales lift EUR/JPY near 118.96 EBS high

  • EUR/USD rallies near 1.1020 but struggle to lift away from the 200-DMA

  • Techs lean bullish; RSIs rise, monthly bull hammer forming for May

  • Close above 200-DMA would bolster bull sentiment, 1.1055/65 then targeted

  • Break above 1.1065 likely leads to test of 1.1145/50 resistance

eur/usd Click here

Refinitiv IFR Research/Market Commentary
By Christopher Romano  —  May 28 - 07:45 AM
  • Equities ESv1 gain; copper HGv1 & iron-ore DCIOc2 are buoyant

  • US-Sino tensions persist nL1N2D92OA, USD/CNH lower but near recent high

  • EM currencies softer versus the greenback nL4N2DA1CP, AUD/JPY near flat

  • AUD/USD trades a tight range and is also near flat on the day

  • Bulls need March high break for rally to resume, break targets 0.7020/40

  • Bears need break of support near 0.6370 if they want to take control

aud/usd Click here

Refinitiv IFR Research/Market Commentary
By Peter Stoneham  —  May 28 - 04:50 AM
  • Decent recovery late Wednesday from lows just above 1.2200

  • However, the pound back on the defensive early Thursday

  • Technically, weekly bull bias highlights GBP resilience

  • Fundamentally a significantly different backdrop nL1N2DA0FB

  • Messy virus lockdown, Brexit deal friction and prospect of negative rates

  • Mkt over short GBP but traders should not get too comfortable in the 1.22s

  • EUR/GBP easier Thursday but still has a 0.90+ look about it near-term

GBP/USD hourly candle chart: Click here

GBP/USD daily Ichimoku chart: Click here

Refinitiv IFR Research/Market Commentary
By Peter Stoneham  —  May 28 - 03:45 AM

More than most currencies, sterling is being bombarded by bad news.
Brexit now casts a shadow over any virus lockdown exit, and with a trade deal with the European Union appearing elusive, the near-term uncertainty will weigh on the pound.
Severe damage to the UK economy from the coronavirus could force the Bank of England to move to negative interest rates.
BoE's Andy Haldane has said the bank was not close to implementing negative rates, but money markets are still pricing in a move below zero nL9N2CQ01R.
Fears of a deep UK recession will shape investor sentiment and hedge funds are reportedly ramping up bearish bets on sterling.
The outlook is grim and displays of stability currently seen may just be reflecting a market that is already heavily short.
However, the risk for a steeper drop is high and a return to levels below 1.2000 can't be ruled out.

GBP/USD daily Ichimoku chart: Click here

Refinitiv IFR Research/Market Commentary
By Peter Stoneham  —  May 28 - 02:35 AM
  • Our 1.2310 short a no cost trade following Wed 1.2263 close

  • Daily cloud base frustrating the trade at 1.2239: below Wed but clsd inside

  • Risk price pans out sideways to the 1.2307-1.2330 June 4 cloud twist

  • 14-day momentum remains negative but RSI not confirming weakness

  • For Thurs the daily cloud extremes likely key: 1.2239-1.2307

  • Weeklies are constructive but long upper shadows erode the bias

GBP/USD Trader:

GBP/USD daily candle chart: Click here

Refinitiv IFR Research/Market Commentary
By eFXdata  —  May 28 - 10:45 AM

Danske Research likes long EUR/GBP in the near-term and prefers to express that via an options structure.

"Near term, we expect a repricing of the Brexit risk premium ahead of the 1 July deadline to send EUR/GBP higher again. We believe this will mirror similar events in late 2018 and summer 2019, when no deal Brexit fears were increasing. The fourth negotiation round is set to begin on 1 June. We do not expect any major breakthrough, as the two sides remain too far from each other. We think the cross could move as high as 0.92 near term," Danske notes. 

"Still, looking further down the road, we expect the parties to reach a deal eventually as we get closer to the deadline, which would send EUR/GBP down again. We would prefer to express our tactical bearish GBP view via options, which we believe would allow for attractive risk-reward," 

Danske Research/Market Commentary
By John Noonan  —  May 27 - 11:55 PM
  • EUR/USD opened 0.24$ higher at 1.1008 after whippy US session

  • Asia was risk-on early as S&P futures moved over 0.4% higher

  • EUR/USD traded to fresh 2-month high at 1.1035 as EUR/JPY buying underpinned

  • Asian equities gave back some ground and the EUR/USD settled around 1.1010

  • It is trading around the 200-day MA @ 1.1011 & close above would be bullish

  • A close above 1.1030 targets the March 27 high at 1.1148

  • Support at the 10-day MA @ 1.0940 and close below would suggest top in place

Refinitiv IFR Research/Market Commentary
By John Noonan  —  May 27 - 11:40 PM
  • AUD/USD opened 0.47% lower at 0.6625 despite late rally on Wall Street

  • Pair traded to 0.6612 early before equities rallied in early Asia

  • AUD/USD traded to 0.6636 with Lowe comments and Aus Capex helping nL4N2DA06EnAZN02P200

  • The equity rally faded late morning and AUD/USD drifted lower

  • Heading into the afternoon AUD/USD trading around session low below 0.6610

  • Failure to break key resistance at 0.6650/85 may encourage paring of longs

  • Support is found at 10-day MA at 0.6560 and break would suggest top in place

aud/usd Click here

Refinitiv IFR Research/Market Commentary
By Andrew M Spencer  —  May 27 - 09:35 PM

PM Johnson has urged the UK to "move on" from the coronavirus lockdown controversy surrounding his aide Cummings, though around 40 Conservative lawmakers have called for his resignation nL8N2D91L5.
A very unusual situation, underlining Cummings' key role as a policy adviser to Johnson.
Cummings is a controversial figure and Johnson may ultimately regret putting his own reputation on the line by saving his job.
Meanwhile Brexit negotiations are going nowhere, increasing the chances of a hard Brexit nL8N2D95E6.
The UK are calling on the EU to break the Brexit impasse, when it was the UK that prioritised sovereignty over an even playing field mid-negotiations, following Johnson's landslide election victory nL8N2D94PI.
UK economic data remains weak and BOE Governor Bailey yesterday flagged clear risks of "a longer and harder recovery" nL8N2D963V.
Thus it is hard to be bullish on sterling at this point.
A lower USD is required to prevent GBP/USD depreciation.
The USD generally benefits from safe-haven flows, so Wall Street's current risk rally must extend for the USD to support cable.
GBP/USD charts show conflicting signals, with little bias.
The May 1.2075 trend low and 1.2359, 50% of the April-May fall, which capped this week are pivotal support and resistance levels.

gbp 2 may 28 Click here

Refinitiv IFR Research/Market Commentary
By John Noonan  —  May 27 - 08:40 PM
  • RBA's Lowe said Australia's economic downturn may not be as bad as feared nS9N2CO01U

  • Lowe said the current cash rate at 0.25% is about as low as it can go

  • Fiscal policy will have to play a greater role than in the past

  • Unlike RBNZ, the RBA not looking at negative rates as an option

  • AUD/USD steady around 0.6620 after trading to 0.6612 earlier

  • Key today will be moves in Asian equity markets after Wall Street surge

  • Resistance in the AUD/USD is found at the 200-day MA at 0.6658

  • Support comes in at 10-day MA at 0.6561

aud/usd Click here

Refinitiv IFR Research/Market Commentary
By eFXdata  —  May 28 - 09:14 AM

Credit Suisse discusses its near-term bias on EUR/USD, GBP/USD, and EUR/GBP. 

"Last week’s news of a possible breakthrough in Europe’s slow march towards debt mutualisation via the Franco-German agreement for the Recovery Fund led us to become more constructive on the EUR. One important consequence of the recent more decidedly risk on environment is an apparent resolution of a long period of consolidation and uncertainty for the BBDXY Broad USD Index in the shape of a downside breach of support levels just below 1240 that has held since late March. This now means that, in view of the price action so far this week, we are minded to make USD the short side of the G10 trades mentioned above alongside GBP, replacing EUR," CS notes. 

"Unless the responses to today’s European Recovery Fund proposals are a total disaster, we can now see EURUSD push beyond its 200-day MA at 1.1012 and make a run towards our new near-term target of 1.1200. We continue to target GBPUSD 1.20 medium term and have also shifted our EURGBP target up to 0.93, in light of an improved tone to intraEuropean debt mutualisation discussions," CS adds. 

Credit Suisse Research/Market Commentary
By John Noonan  —  May 27 - 07:20 PM
  • EUR/USD opens 0.24% higher at the 200-day MA around 1.1010

  • It traded to 1.1031 after EU unveiled rescue plan nL8N2D91X6

  • EUR/USD then reversed down to 1.0955 when USD rose on US-China concerns

  • The strong, late rally on Wall Street pushed EUR/USD back above 1.1000

  • A break and close above 1.1035 will likely send EUR/USD above 1.1100

  • Support is found at 10-day MA at 1.0940 and 21-day MA at 1.0896

aud/usd Click here

Refinitiv IFR Research/Market Commentary
By John Noonan  —  May 27 - 06:35 PM
  • AUD/USD opens 0.47% lower at 0.6625 after an extremely whippy US session

  • It traded to a 11-week high at 0.6680 before vicious reversal to 0.6567

  • Late rally on Wall Street helped lift the AUD/USD back above 0.6600

  • Move lower coincided with risk-off pulse on China concerns and weak CNY nL4N2D913M

  • AUD/USD resistance between 0.6655/85 proving sticky and warns of correction

  • 200-day MA @ 0.6658; 76.4 of 0.7032/0.5510 @ 0.6672 & March 9 high @ 0.6685

  • Support at 10-day MA at 0.6560 and 21-day MA at 0.6510

  • Correlation between AUD/USD and S&P showing signs of breaking down

  • FX market caught between growing China concerns and surging Wall Street

aud/usd Click here

Refinitiv IFR Research/Market Commentary
By eFXdata  —  May 28 - 08:26 AM
Societie Generale Research flags a scope fro EUR/USD to break higher, while maintains shorts in EUR/JPY and GBP/JPY.
"A slightly stronger fix in Beijing was interpreted a signal that the authorities are, at least, reluctant to see their currency weaken too fast. If that triggers yuan short-covering, that could be a catalyst, in thin market conditions, for the euro to break higher into the month-end. So far, EUR/USD has twice failed to close above its 200-day average (1.1012) and since the March madness moves, has tested but failed to break it's 2-year downtrend, the top of which is at 1.11 now," SocGen notes. 

"We've short EUR/JPY and GBP/JPY, with stops at 120 and 136 and we'll leave those to do their work. Sterling's by far the worst of the major currencies this month and while that opens the way for month-end short-covering, Andrew Bailey reasserts the MPC's readiness to act further in the Guardian. He's keeping the negative rate debate alive...Sterling's only support is the size of the short positions and thin month-end markets magnify that support, but that doesn't change the fundamentals," SocGen adds. 
Société Générale Research/Market Commentary
By Christopher Romano  —  May 27 - 02:25 PM
  • NY opens below day's 1.10315 EBS high, EC proposal buoys nL1N2D90QO

  • EUR/USD begins falling as risk sours a bit & safe-haven buyers emerge

  • Equities erode gains, EUR/JPY trades from 118.90 to 118.15 on EBS

  • EUR/USD longs take some profit, pair trades down to 1.0955 on EBS

  • Risk rebounds though, stocks rally & US$ is sold, EUR/USD near 1.0990 late

  • Daily doji candle forms, suggests the market is indecisive for now

  • Longs to remain cautious on US-Sino tensions, EC proposal nL1N2D910Y

eur/usd Click here

Refinitiv IFR Research/Market Commentary
By eFXdata  —  May 27 - 03:10 PM

TD Research maintains a structural bullish bias on the USD through Q2.

"Global equity benchmarks, like MSCI World and the US, hold hefty premiums to growth drivers, leaving risk assets vulnerable to a shift in sentiment. That's also the reflection of the currency market where the BDXY has lost about 5% off the highs," TD notes. 

"Excessive valuations are not a reason to sell. Still, they should be monitored in case of a narrative shift, given the drawdown potential if the news cycle goes sour. The other side of this is the weaker USD, which has mirrored the moves in risk assets. This backdrop leaves us expecting further consolidation in the buck as we progress through Q2, especially against European currencies like EUR and GBP," TD adds.


TD Bank Research/Market Commentary
By Paul Spirgel  —  May 27 - 02:05 PM
  • GBP/USD rises off NorAm low 1.2201 ends NY 1.2245, NorAm range 1.2341-1.2201

  • Brexit fears weigh into fix despite rise on EU enhanced aid pgm nL8N2D91X6

  • Sterling bulls turn tail near Fib resistance in mid-1.23s again nL1N2D90YL

  • GBP res Tues/Wed by 1.2359, 50% Fib of 1.2644-1.2075; supt 1.2161 May 22 low

  • EUR/GBP ends NY +0.67% at 0.8969, Wed range 0.8993-0.8889; EU aid boosts EUR, UK won't qualify for aid

GBP Chart: Click here

Refinitiv IFR Research/Market Commentary
By eFXdata  —  May 27 - 01:45 PM

Bank of America Global Research argues that Fed's program focus may have to shift with worsening economic outlook.

"Fed large-scale market intervention has successfully achieved its primary objective: to restore market functioning and keep credit flowing. Fed programs are primarily designed as "backstop" facilities with punitive rates. The Fed seems to judge their success not by total usage but by activity in the underlying markets they target. Reflecting this, we estimate Fed credit and muni program use will see ~15% of potential," BofA notes.

"We believe several of these programs may have to shift from their "backstop" design to more explicitly easing financial conditions, given the expected depth and length of the current recession. Specifically, we expect (1) UST and agency MBS purchases to shift from focus primarily on market functioning to easing macro conditions and (2) increased political pressure to revise Main Street Lending and muni terms to increase credit and lending activity. We may also see the Fed allocating more funds to secondary market credit purchases. Such shifts would support lower real rates and risky assets," BofA adds.

BofA Global Research
By Christopher Romano  —  May 27 - 10:30 AM

EUR/USD longs remain cautious even after risk sentiment improved after the EU Commission announced its recovery proposal nL1N2D90GA.
Initially, German 10-year Bund yields extended their rally, DE-IT yield spreads tightened to levels not seen since March 27 and EUR/USD rallied above the 200-DMA to hit a 1.10315 high on EBS nL1N2D90QO.
But, risk sentiment is deteriorating a bit as U.S.-Sino tensions nL1N2D81TJ show no signs of abating [ Click here ].
Those tensions have weakened China's yuan significantly.
USD/CNH CNH= broke 7.1650/75 resistance while USD/CNY CNY= rallied above 7.1500.
Both pairs are nearing their September 2019 highs.
Should risk sentiment worsen the September highs are likely to break, which could drive investors into traditional safe havens like the dollar and yen.
Those risks combined with the EU Commission's plan still needing ratification nL8N2D91X6 helped drive EUR/USD close to flat on the day.
EUR/USD longs will need U.S.-China tensions to ease and negotiations for the EU recovery proposal to go smoothly if they expect EUR/USD to close above the 200-DMA and break key 1.1055/65 resistance where the March 31 daily high, daily cloud top and 50% Fibo of 1.1495-1.0636 sit.

eur/usd Click here

usd/cny Click here

Refinitiv IFR Research/Market Commentary
By Peter Stoneham  —  May 27 - 08:25 AM
  • Follow up to Tues's rally and a brief breach of 1.1012 200DMA, now key

  • Price pulls swiftly away from 1.1031 high: risks dropping back under 100DMA

  • 14-day momentum with the bulls but a sub-1.0982, Tues close, could damage

  • Price heading back to mid-cloud: cloud extremes seen as key trigger points

  • Cloud levels are 1.0895 and 1.1065 and doesn't narrow until July

  • Weekly action remains heavily bullish and targets the weekly cloud

EUR/USD Trader

EUR/USD daily candle chart: Click here

Refinitiv IFR Research/Market Commentary
By Jeremy Boulton  —  May 27 - 07:15 AM

EUR/USD traders reacted to massive U.S. stimulus and bought.
Traders have reacted to massive European stimulus plans by buying.
One of these reactions is wrong.
If stimulus is good, which markets obviously assume given some big stock and commodity gains, then U.S. stimulus, which is the largest of all, is good for the dollar, not bad.
If stimulus undermines a currency, then recent euro gains after a European Union recovery fund was proposed are flawed, which means that a lot of buying has is occurring at the high end of current ranges nL1N2D90H5.
Stimulus usually undermines currencies with low rates.
Eurozone rates are lower than U.S. rates.
The difference is slight, so the long-term EUR/USD outlook may now be determined by which economy is stronger.
The United States was stronger going into this crisis.
Both economies have been deeply hurt but the U.S. economy is larger and with greater stimulus should see a faster recovery.

EUR/USD Click here

Refinitiv IFR Research/Market Commentary
By Richard Pace  —  May 27 - 06:25 AM
  • EUR/USD boosted by big EC proposed EU rescue package nL1N2D90GC

  • From mid 1.09's it breached 21 May 1.1008, stops above May 1 hi 1.1019

  • 1.1031 new high since Apr 1, setback met buyers by 1.1010 since

  • Close above 200-dma 1.1012 would open late March double top 1.1148-44

  • EUR/USD FX Options opened with a bullish lean Wednesday nL1N2D90GC

EUR=EBS Click here

Refinitiv IFR Research/Market Commentary
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