• NY opened near 0.6500, an early lift near 0.6510 was sold, 0.64835 traded

• US yields US10YT=RR supported a broad based rally for the US$

• USD/JPY traded above 155.30, UDS/CNH rallied above 7.2730 on D3

• Equities ESv1 giving up early gains also weighed on AUD/USD

• Gold XAU=, copper HGv1 gains helped to keep AUD/USD up on the session

• AUD/USD neared 0.6500 late in the session with help from AUD/JPY's lift

• Daily inverted hammer formed after 55- & 200-DMAs neared; is a bear signal

• US Q1 GDP & its PCE component and weekly claims are data risks Thursday

• For more click on FXBUZ

Synopsis:

Danske Bank provides an analysis of the EUR/USD currency pair, noting its stabilization within the 1.06-1.07 range and potential for limited near-term gains following weaker-than-expected US PMI data. Despite ongoing discussions about the possibility of EUR/USD reaching parity, Danske maintains a bearish outlook but does not foresee parity in the near future due to differing rate expectations between the Fed and ECB.

Key Points:

• Recent Market Movements: EUR/USD has shown some resilience this week, stabilizing in the 1.06-1.07 range. The pair briefly surpassed the 1.07 mark following disappointing PMI data from the US, which sparked doubts about the strength of the US economy compared to the Eurozone.

• Impact of US and Eurozone PMIs: The US composite PMI declined to 50.9 in April, below consensus expectations and previous figures, hinting at potential economic softening. Conversely, the Eurozone composite PMI exceeded expectations, suggesting a more robust economic performance, particularly in the services sector.

• Discussion on EUR/USD Parity: Despite market speculations and a rise in the option-implied probability of EUR/USD reaching parity this year, Danske Bank remains skeptical of this scenario. The bank highlights divergent monetary policies as a key factor supporting the euro against the dollar.

• Central Bank Rate Expectations: Expectations for a Fed rate cut this summer, which are currently undervalued according to Danske, could provide additional support to EUR/USD. However, any gains are expected to be limited. ECB rate cut expectations remain steady, with significant cuts anticipated by year-end.

• Outlook and Strategy: While Danske maintains a long-term bearish view on EUR/USD, the bank acknowledges that immediate factors, such as softer US economic data and stronger Eurozone activity, might lend some support to the euro in the short term.

Conclusion:

Danske Bank's analysis suggests that while EUR/USD may see some limited upward movement in the near term, broader economic and monetary policy divergences will continue to influence the currency pair's trajectory.

• Sterling largely consolidating recent rebound, EUR/GBP holds below 0.86

• While rate differentials are supportive of this bounce back in cable

• GBP/USD longs are not out of the woods. Short-term flows are USD supportive

• Meanwhile, risks to U.S. GDP are tilted to a topside surprise

• Resistance remains situated at 1.25. Support resides at 1.23

• Elsewhere, a 1bln pound option expiry (Fri) at 1.2430 may attract

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Synopsis:

MUFG analyzes the recent Australian CPI data and assesses its implications for the Reserve Bank of Australia's (RBA) upcoming policy decisions. Despite a slowdown in inflation, rates remain higher than the RBA's projections, suggesting potential adjustments in the central bank's approach in the near term.

Key Points:

• Recent CPI Data: Australia's headline inflation decreased from 4.1% year-over-year (YoY) in Q4 to 3.6% YoY in Q1, while the trimmed mean inflation, RBA’s preferred measure, dropped from 4.2% YoY to 4.0% YoY. Both figures exceeded market consensus by 10-20 basis points, indicating a slower deceleration in inflation than anticipated.

• RBA’s Inflation Forecast Adjustments: Given the recent data, the RBA is likely to revise its H1 2024 inflation forecasts upward in its upcoming Statement on Monetary Policy (SMP) on May 7. The adjustments could be at least 25 basis points higher than previous estimates, reflecting persistent inflationary pressures.

• Policy Implications: The persistence of higher inflation rates may compel the RBA to delay its timeline for bringing inflation back to its target range of 2-3%. This situation reduces the likelihood of rate cuts in the near term and may lead the RBA to adopt a more hawkish stance at its May 7 meeting.

• Governor Bullock’s Remarks: RBA Governor Michele Bullock's recent comments underscore the central bank's low tolerance for inflation surprises and its cautious approach towards returning inflation to the target band. She has indicated that both rate cuts and hikes remain possibilities, depending on economic conditions.

• Impact of Mortgage Rollovers: The ongoing wave of mortgage rollovers, which began in March and peaks in June, is another critical factor for the RBA. The central bank is expected to monitor the effects of these rollovers on household finances closely before making further policy adjustments.

• Rate Hike Prospects: While a rate hike seems unlikely in the immediate future due to the timing of mortgage rollovers and their potential impact, MUFG suggests that a rate cut in November is more probable than an increase, given the current economic landscape.

Conclusion:

MUFG anticipates that the RBA will maintain a cautious but hawkish policy stance in the short term, driven by higher-than-expected inflation figures and the need to carefully assess household financial stability amid significant mortgage rollovers.

• CAD slips through 1.37 vs dollar, CA retail sales underpins June BoC cut

• Retail sales -0.1% vs 0.1% f/c. Core = -0.3% vs 0.0% f/c

• Currently, markets see a June rate cut as a 50/50 call 0#BOCWATCH

• However, the latest CPI print should sway the BoC's decision to cut rates

• 100HMA (1.3722) caps for now. Support: 1.3650, 1.3600-10 (prior range top)

• Month-end flows, topside US GDP risks should support USD/CAD in near-term

• Window of opportunity for dollar bulls nL2N3GX0S1

For more click on FXBUZ

Synopsis:

MUFG assesses the recent sharp rise in GBP/USD, attributed to contrasting PMI data between the UK/Euro-zone and the US. Despite the largest one-day gain since December 14, MUFG remains cautious about the sustainability of this upward movement due to potential BoE policy actions and broader economic factors.

Key Points:

• Strong PMI Data in Europe: The latest PMI data revealed a significant contrast between the UK and the Euro-zone's robust performance and the weaker figures from the US. This disparity has notably favored the GBP, contributing to a substantial 0.8% increase in GBP/USD—the biggest one-day gain since December 14.

• Impact of US Data: The unexpected weakness in US data, following a period of relatively stronger figures, has played a critical role in the recent GBP/USD rally, challenging the previous dominance of the US dollar in currency markets.

• Bank of England's Potential Rate Cut: While the June rate cut by the Bank of England (BoE) remains on the table, MUFG expresses skepticism regarding the continuation of the recent bullish momentum for the GBP. The possibility of a rate cut could temper expectations for further gains.

• European Growth and US Dollar Buying: The observed pick-up in growth within Europe is likely to act as a buffer against aggressive US dollar buying, particularly at stronger levels. Even modest improvements in European economic growth could help limit the appreciation of the dollar going forward.

Conclusion:

While recent PMI data has provided significant support to GBP/USD, leading to its biggest one-day gain in months, MUFG advises caution moving forward. The potential for a BoE rate cut in June and the evolving economic landscape in Europe may influence the trajectory of GBP/USD.

Synopsis:

As the USD/JPY approaches the critical 155 level, Bank of America anticipates a potential rally induced by the upcoming Bank of Japan (BoJ) monetary policy meeting. This movement might prompt the Ministry of Finance (MoF) to intervene in the foreign exchange market to stabilize the yen.

Key Points:

• BoJ Monetary Policy Meeting: The BoJ's upcoming meeting on April 25-26 is seen as a pivotal event that could influence the trajectory of the USD/JPY. The meeting arrives at a time when USD/JPY is flirting with the 155 mark, which is regarded by many as a threshold for potential intervention by Japan's MoF.

• Market Expectations: There is widespread anticipation that the BoJ might need to adjust its communication or policy stance due to the weakening yen and its impact on inflation. However, BofA analysts believe that for the BoJ to significantly bolster the yen, it would need to signal a shift towards a less accommodative policy stance and a higher-than-expected terminal rate—outcomes that are considered unlikely at this juncture.

• Potential for FX Intervention: The market remains bullish on USD/JPY, closely watching for any intervention by the MoF around the 155 level. If the MoF does not intervene when USD/JPY reaches or exceeds 155, there could be rapid market movements towards 160, testing the MoF's resolve at higher levels.

• MoF's Preparedness for Intervention: While the MoF's exact threshold for intervention ('line in the sand') has been a subject of speculation, recent currency movements suggest that it could be higher than previously anticipated. Factors that may have previously deterred intervention are now being reassessed, and the MoF might be more prepared to act to curb excessive volatility in the exchange rate.

Conclusion:

The forthcoming BoJ monetary policy meeting is set against a backdrop of significant market anticipation regarding potential interventions in the currency market by Japan's MoF. The possibility of the USD/JPY rallying through the 155 level serves as a focal point for traders and policymakers alike. BofA's analysis suggests that the meeting could be a catalyst for significant currency movements, with implications for global financial markets.

• AUD/USD traded 0.64845-0.6530 in Asia on the back of Australia CPI

• Upside beat for Q1 CPI rallied yields AU3YT=RR, dashed hopes for RBA cuts

• Iron-ore DCIOc2, equity ESv1 gains also helped buoy AUD/USD

• Much of the gains eroded as US yield US2YT=RR gains rallied the US$

• USD/CNH rallied to 7.2675 (D3), USD/JPY hit a fresh multi-decade high

• Gold XAU=, copper HGv1 fell which weighed on commodity currencies

• AUD/USD traded 0.6498, NY opened just above 0.6500, was up +0.18% early NY

• Rally stalled near converging 55- & 200-DMAs, daily inverted hammer formed

• Rising daily RSI & April's monthly doji candle may give longs some comfort

• US March durable goods is the main data risks during NY's morning

• For more click on FXBUZ

• Dollar recovers from PMI slump, yen closes in on 155 per dollar nL2N3GX0FU

• USD/JPY has seen a 154.73-98 range, on Wednesday, according to EBS data

• Fundamental and technical factors are pressuring Japan nL2N3GX0QL

• Rate differential between the Fed and BOJ USD/JPY's bias on the upside

• Daily chart points to bigger USD/JPY gains in coming sessions nL2N3GX0IT

• Ochi: Yen's slide toward 160 level could trigger action nL3N3GX0ID

• USD/JPY and EUR/JPY pairs maintain a strong 60-day positive correlation

April 24 (Reuters) - USD/JPY bulls hoping for Japan's second USD/JPY line in the sand at 155 to be washed away, like the first at 152, have been heartened by relatively dovish comments from Takao Ochi.

Senior LDP offical Ochi told Reuters on Tuesday that "if the yen slides further toward 160 or 170 to the dollar, that may be deemed excessive and could prompt policymakers to consider some action".

Ochi also said that "general thinking within the LDP appears that rather than rushing to reverse the yen's declines, we would need to evaluate the impact of the weakness carefully".

USD/JPY, which was last at 160 in 1990 and last at 170 in 1986, notched a new 34-year EBS high two pips shy of 155 on Wednesday.

CFTC data on FX positioning due Friday will show if the net JPY short rose for a sixth consecutive week to a new 17-year high in the week ended Tuesday.

Related comment: nL2N3GW0QL

For more click on FXBUZ

• EUR/USD last week failed under 1.0611 Fibo, leading to a subsequent recovery

• 1.0611 Fibo is a 76.4% retrace of the 1.0448-1.1139 (Oct-Dec) EBS rise

• Despite that failure, negative 14-day momentum shows the mkt remains bearish

• The negative alignment of the tenkan and kijun lines also points to a drop

• EUR/USD Trader TGM2334. Offer at 1.0725. Previous update nL2N3GW0FC

• Expectations for a deeper sell-off built, pair rallied

• Last week's 1.0601 low fell shy of key fibo at 1.0596

• Drop stretched below base 20-day Bollingers ahead bounce

• Subsequent rise to 1.0714 EBS on Apr 24 approaching neutral ground

• Target for minor correction of drop from April high has been achieved

• Rally heightens chance that daily cloud twist around 1.0840 attracts

• A bearish market will more likely seek opportunities to sell

• EUR/USD is paradise for counter-traders nL2N3GV143

• Monday hammer candle (bullish) into strong Tuesday confirmation

• Our long play just on-side and stop raised

• Sticky price action early Wednesday and risk of pullbacks

• Fibo levels taken off 1.2893-1.2299 drop are at 1.2526 and 1.2596

• Fourteen day momentum still reflecting recent sharp losses

• Daily RSI showing signs of bearish divergence

• Will hold long for now but today's close now key

  For more click on FXBUZ

• Up 0.1% in a 1.2448-1.2464 range with plenty of interest on D3

• UK pay settlements edged lower in the first quarter but rose in April

• Wage settlements in April average 5% - will make the BoE cautious on cuts

• CBI Industrial order expectations lead the UK data schedule - RTRS poll -16

• Charts; 10 & 21-day moving averages fall, 21-day Bollinger bands track lower

• Daily momentum studies base or rise - charts retain a net bearish bias

• A close above 1.2526 38.2% Mar/Apr fall and 1.2533 21 DMA would be bullish

• This week's 1.2299 low and Friday's 1.2467 top are first support/resistance

For more click on FXBUZ

• EUR/USD opened +0.45% at 1.0701 after USD broadly eased on softer US yields nL2N3GW2D5

• It traded in a 1.0700/14 range in Asia and is 1.0705 into the afternoon

• The close above the 10-day MA at 1.0664 suggests there is a bottom in place

• Resistance is @ 1.0740/45 where 21-day MA & 38.2 of March-Apr fall converge

• A break above 1.0750 would likely spark a short-term trend higher

• Bias is for EUR/USD to edge higher ahead of key US PCE price index Friday

• Support is now at the 10-day MA at 1.0664For more click on FXBUZ

Synopsis:

Danske Bank provides insights into the currency market, highlighting a potential undervaluation by the market of the likelihood of a Federal Reserve rate cut this summer. While such a move might temporarily bolster EUR/USD, Danske Bank remains cautious about the long-term prospects for the currency pair, citing broader economic factors that favor a strong USD.

Key Points:

• Potential Summer Fed Rate Cut: Danske Bank suggests that markets might be underestimating the possibility of a Federal Reserve rate cut during the summer. This oversight could lead to lower U.S. interest rates in the short term, providing a temporary uplift for EUR/USD.

• Limited Support for EUR/USD: Despite the potential short-term relief from a Fed rate cut, Danske Bank maintains a cautious stance on the EUR/USD pair. The bank predicts only limited support from such a move, with expectations that the pair will trend lower in the long term.

• Structural Factors Favoring the USD: Danske Bank argues that structural improvements in the U.S. economy—such as gains in productivity, labor force developments, and favorable terms of trade—will continue to support the strength of the USD over a strategic horizon. These factors are likely to exert significant influence on currency dynamics, outweighing the temporary impacts of monetary policy adjustments.

• Long-Term Outlook for EUR/USD: The long-term forecast for EUR/USD remains bearish according to Danske Bank, with strategic factors expected to keep the USD strong relative to the EUR, despite transient shifts in Fed policy.

Conclusion:

While the potential for a summer rate cut by the Federal Reserve could offer brief support to EUR/USD, Danske Bank anticipates that the effect will be limited. Long-term prospects for the currency pair continue to be influenced by structural factors that favor a robust USD.

Much higher-than-expected first-quarter Australian inflation data has sent the AUD/USD higher on Wednesday, while giving the data-dependent Reserve Bank of Australia a real headache.

A Reuters poll before the RBA's March meeting showed most economists predicting the central bank wouldstart easing between August and November.
Market pricing in late March indicated a 75% chance of a 25 basis-point rate cut as early as August and close to 50 bps of cuts by year-end.

Following Wednesday's hot Q1 CPI, the market is pricing in less than a 25% chance of a 25 bps rate cut by year-end.
The strong inflation pulse will likely spur the RBA to reinstate a hawkish bias and perhaps even sharpen its language to include the possibility of having to tighten again.

The AUD/USD traded up to 0.6525 following the CPI release, just ahead of key resistance at 0.6530, where both the 55-day and 200-day moving averages converge. A clear break above that level would clear the way for a test of the April 9 high at 0.6644.

The next key event will be the U.S. core PCE price index for March due on Friday.
If it doesn't exceed the 2.7% annual rise expected, the AUD/USD will likely test higher levels.

For more click on FXBUZ

• AUD/USD has broken above 0.6500 after hotter than expected Q4 Aus CPI nAZN1OO0Q5

• The rise in inflation will cause concern for the data dependent RBA

• AUD/USD touched 0.6525 before easing to 0.6515/20

• It is above the 21-day MA (0.6505) with next resistance at 0.6530

• Both the 55 and 200-day MAs converge at 0.6530

• For more click on FXBUZ

• +0.05% - closed +0.8% as UK services and manufacturing beat expectations

• BoE Chief Economist Pill says rate cut some way off, despite recent progress

• Expect the BoE to remain data-driven on the timing of upcoming rate moves

• UK pay settlements edged lower in the first quarter but rose in April

• Wage settlements in April average 5% - will make the BoE cautious on cuts

• Charts; 10 & 21-day moving averages fall, 21-day Bollinger bands track lower

• Daily momentum studies base or rise - charts retain the bearish bias

• This week's 1.2299 low and Friday's 1.2467 top are first support/resistance

For more click on FXBUZ

• Flat, closed +0.45% as EU services PMI beat expectations, and the US missed

• Yield spreads tightened, 10yr bund +1bp, 10yr UST -3bp 4.598%

• ECB should be very cautious about post-June rate cuts - de Guindos

• Expect the ECB to be data-driven after delivering the June 25pt cut

• Charts - 10 and 21-day moving averages, plus 21-day Bollinger bands slide

• Daily momentum studies base or rise - mixed signals - downtrend has stalled

• The close above the 1.0695 prior 2024 low suggests a base may be in place

• 1.0700 2.260 BLN April 24th strikes may act as a magnet today in Asia

For more click on FXBUZ

• AUD/USD opens +0.62% after USD broadly eased and risk rally continued nL2N3GW25WnL2N3GW34D

• AUD/USD close above 10-day MA (0.6454) suggests bottom in place at 0.6362

• Resistance is at the 21-day MA at 0.6504 with sellers tipped ahead of 0.6500

• Key resistance is at 0.6530 where the 55 and 200-day MAs converge

• The 10-day MA at 0.6454 is now support, with bids eyed at 0.6440

• Key Aus Q1 CPI will be released today and could shape RBA expectations

• Weighted mean is expected to ease to +4.1% Y/Y from +4.4% in Q4

• A hotter than expected result could make RBA more cautions in future easing

• U.S. PCE price index follows on Thursday - to provide a comparison

• For more click on FXBUZ

Synopsis:

Credit Agricole provides insights into the implications of the upcoming Australian CPI data release on the AUD's performance and the Reserve Bank of Australia's (RBA) monetary policy outlook. The bank highlights the challenges posed by sticky services inflation and rising costs in certain sectors, which could influence the pace of inflation deceleration.

Key Points:

• CPI Data Release: The Australian CPI data scheduled for release on Wednesday is anticipated to play a significant role in shaping the AUD's performance for the week. This follows similar trends observed in New Zealand’s recent inflation data, where falling goods prices were offset by persistent services inflation.

• Inflation Trends and Expectations: While goods prices, particularly food, are expected to continue their downward trajectory, services inflation remains stubborn, particularly due to rising education, housing costs, and higher insurance premiums. These factors contribute to the complexity of reducing inflation to within the RBA’s target range of 2-3%.

• Market Consensus on Inflation Rates: Consensus forecasts suggest a decrease in headline inflation from 4.1% year-over-year (YoY) to 3.5% YoY for Q1. The RBA’s preferred measure, trimmed mean inflation, is also expected to show a decline, albeit more modest, from 4.2% YoY to 3.8% YoY.

• Implications for RBA Monetary Policy: The data is expected to solidify market expectations that the RBA will likely hold off on any rate cuts until late 2024, if at all this year. The RBA’s own forecasts for H1 2024 predict headline inflation at 3.3% and trimmed mean inflation at 3.6%, indicating a cautious approach towards easing monetary policy.

Conclusion:

As Australia prepares for a significant CPI data release, Credit Agricole underscores the challenges of managing persistent services inflation alongside declining goods prices. The upcoming inflation figures are crucial for the AUD's trajectory and could reinforce the stance that the RBA may delay rate cuts, awaiting more definitive signs of inflation aligning with its target range.

• Gold drops to $2295/oz - $136/oz below this year's record high

• Gold dropping quickly from $2417.59/oz on Friday

• Rally was extremely stretched when gold reached the record high last week

• Targets for minor corrections of Oct-Apr rise are $2284 and $2194

• Gold traders have established big bet on a rise - lots of profits to book

• Most other markets fairly placid so driver most likely profit taking

•  

• NY opened near 1.0655 after 1.06385 traded on EBS in Europe's morning

• Rally extended with help from surprises to April S&P Global PMIs

• Data indicating slowing business activity sank yields US2YT=RR, US$

• German-US yield spreads US2DE2=RR tightened, risk assets rallied

• USD/CNH slid from its high, stocks ESv1 & gold XAU= rallied

• EUR/USD rallied away from the 10-DMa, hit a 7-session high of 1.0711

• Rising daily RSI, daily bull hammer are concerns for EUR/USD shorts

• German April Ifo, Us March durable goods are data risks Wednesday

• For more click on FXBUZ