• 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)

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)