• AUD/USD has traded a 26.5 pip range thus far Wednesday; 0.7114 is intra-day peak

• 0.7114 is 2.1 pips shy of the rally high from Tuesday's five-week low of 0.7080

• Drop to 0.7080 was prompted by 30-year UST yield's rise to a 19-year high

• Nikkei fell 1.2% on Wednesday, its fifth consecutive daily loss (AUD is risk-sensitive)

• 0.7272 was AUD/USD high on May 13 - the last positive day for Nikkei

• Australia's tax changes will re-wire investors to chase income

AUDUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

• EUR/USD revisits early April lows below 1.1600 amid souring risk appetite and higher US yields - lifting FX option premiums

• A huge EUR 1.1 billion 1.1600 FX option expiry and related hedging flows may help contain price action Wednesday

• Benchmark 1-month expiry implied volatility tests 6.0 from last week's new low since January at 5.35 - still well below 9.0 March peak

• Risk reversals nudge up to 0.6 EUR puts over calls in 1-month expiry — but that's less than half the 1.5 peaks seen in early March

• Mild hedging flows covering potential to the 1.1500 triple bottom from early April have been reported, but there's certainly no panic

• Bottom line: FX options are telling a story of measured EUR/USD caution — recognising the risk but not expecting a rapid decline

• Related - There's still value despite higher AUD/USD option prices
EUR/USD FXO implied volatility


EUR/USD 25 delta risk reversals


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

• Cable dips to 1.3377, then rallies to 1.3406, after cooler than expected UK inflation data

• CPI up 2.8% YY in April vs 3.0% forecast. 1.3377 = fractionally fresh two-day low

• 1.3406 is intra-day high. 1.3378-1.3401 was Asian session range (pre-UK CPI data)

• Cooler CPI print is boost for doves opposed to BoE rate hike in June

• BoE's Bailey, Breeden, Mann and Dhingra to address UK TSC from 1315 GMT

• UK PMQs 1100-1130GMT; first since Labour's poor local election results

GBPUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

• FX option implied volatility is underpinned but overall gains limited amid recent souring of risk sentiment and firmer USD

• AUD/USD implied vol sees biggest G10 gains given its high sensitivity to risk-off flows

• Last week's low AUD/USD vol prices highlighted value for hedgers — spot drop and vol gains proved them right

• EUR/USD vol gains modest by comparison, but risk reversals increase EUR put over call premium to recognise downside risks

• EUR/USD benchmark 1-month 25 delta risk reversals reach 0.6 - will support vols on any deeper spot declines

• However, overall G10 FX vol gains contained — levels remain closer to Mid-East conflict lows than the early March highs
Benchmark 1-month expiry FXO implied volatility


EUR/USD 25 delta risk reversals


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

• FX options expire at 10am New York/14:00 GMT on Wednesday May 20

• EUR/USD: 1.1500 (510M), 1.1575 (270M), 1.1600 (1.1BLN), 1.1620-25 (578M), 1.1640-50 (805M)

• USD/CHF: 0.7800 (368M), 0.7905 (175M). GBP/USD: 1.3450 (200M)

• AUD/USD: 0.7050 (505M), 0.7200 (275M)

• NZD/USD: 0.5850 (950M). AUD/NZD: 1.2090 (226M)

• USD/CAD: 1.3600 (516M), 1.3630 (200M), 1.3875 (1.1BLN)

• USD/JPY: 157.50 (760M), 157.75 (415M), 158.00 (1.2BLN), 158.25 (534M), 158.45-60 (947M)

• 159.40 (495M), 160.00 (698M), 161.00 (1.1BLN)

• EUR/JPY: 183.50 (200M)(Richard Pace is a Reuters market analyst. The views expressed are his own)

• Australian gold stocks fall as much as 4.6% to their lowest point since March 30, tracking easing bullion prices

• Gold prices nudge lower as rising Treasury yields and a firm dollar outweigh optimism over a potential U.S.-Iran peace agreement [GOL/]

• Evolution Mining sheds as much as 5.3% to fall to a 5-month low; Northern Star Resources loses 3%

• Broader market down 1.1%

• YTD, sub-index's ~16% loss compares with the benchmark's 2.4% loss

(Reporting by Shruti Agarwal in Bengaluru)

• GBP/USD trades with a soft tone in Asia after closing 0.3% lower Tuesday

• Undermined by surging U.S. yields and rising Fed rate hike expectations

• Chances of a December rate hike now at 60% on CME's FedWatch tool

• 100k fall in Apr UK payrolls weighs on GBP; biggest since start of COVID-19

• April inflation data Wed key for BoE rate outlook as stagflation risks rise

• Former lows at 1.3450-60 is now strong resistance; more at 1.3480, 1.3500

• Support 1.3350, 1.3300; ranges Tue 1.3379-1.3435, Asia 1.3378-1.3400
UK payrolls:

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

• AUD/USD -0.2% Wed as softening global risk appetite continues to weigh

• Pair teasing break below 0.7090 55-DMA, confirmation would invigorate bears

• AU Apr employment update Thur, Reuters poll: +15k jobs, 4.3% unemployment

• CN leaves prime loan rates on hold (3.00% 1y, 3.50% 5y) as expected

• Fed hike expectations continue to rise, 30-year yields highest since 2007

• Trump refreshes threats against Iran, claims Iran 'begging' for a deal

• Range Asia 0.7092-0.7113, support 0.7080 0.6834, resistance 0.7283 0.7661
`AUD Daily 55-DMA

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

• USD/JPY remained bid yesterday, up to 159.25 EBS, Asia today 159.00-11

• Market still wary of MOF-ordered FX intervention, BOJ watch on too now

• US TsySec Bessent again chimed in on BOJ hike, said government should allow

• Most in Tokyo already see 25 bp June hike to 1% in policy rate

• Combination of FX intervention, BOJ hike to help push yen higher?

• MOF, for its part, seems to holding on to ammunition

• Likely to act when it deems market most long USD, most vulnerable

• Specs in meantime will likely buy dips/sell rallies in nifty trading

• Japanese importer bids today too, another Gotobi Tokyo fix

• JGB-US Treasury short-end rate differentials off recent high, 2s @262 bps

• Longer-end rate differentials still on narrow side, 10s @181 bps

• Option expiries today 157.95-158.00 $1.5 bln, 158.25-55 $1.7 bln

• Some at 159.40 and then 160.00, $1.1 bln up at 161.00

• Daily Ichimoku cloud 156.37-158.97, more supportive than not currently

• Related comments , , ,also

• US markets , , ,

• On Bessent , BOJ Fed-speak

• And , on US data , for more click on [FXBUZ]

USD/JPY:

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

• NZD/USD -2.6% From May 6 0.5991 high as confidence in economy abates

• NZ government says will target 8.7k public service job cuts by 2029

• Tighter fiscal policy working against RBNZ efforts to revive economy

• Fed hike expectations continue to rise, 30-year yields highest since 2007

• Trump refreshes threats against Iran, claims Iran 'begging' for a deal

• NZ Apr trade balance update due Thur, prior 3.2 bln deficit

• Range NZ 0.58344-375, 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.)

ANZ Research adopts a negative bias on GBP/USD in the near-term.

"From an FX standpoint, the main question goes beyond Starmer's time in office to whether any new leader will uphold the UK's fiscal policies and keep investor confidence in government bonds. Yields on longer term UK debt have risen last week, which is important as increased borrowing costs limit the government's financial flexibility. This episode is different from the Truss crisis in 2022, but parallels are being drawn. No formal policy changes or unfunded fiscal packages have emerged this time. The issue is primarily political, with fiscal risks dependent on future decisions,": ANZ notes.

"Overall, our outlook for GBP/USD is negative in the near term. Any upward movement is likely to be limited unless political risks diminish and gilt yields decline. GBP/USD has broken below the key moving average and key support now lies around 1.329," ANZ adds.

• AUD/USD -1.0% from Tue 0.71774 high, hits 55-DMA for first time since Apr 13

• Metals softness fanning downside momentum, Copper -5.5% from May 13 peak

• RBA sees breathing space post-May hike to assess economic impact of Iran war

• Trump revisits threats against Iran, claims Iran 'begging' for a deal

• CN loan prime rate decisions Wed, prior: 3.00% 1y, 3.50% 5y

• AU Apr employment update Thur, Reuters poll: +15k jobs, 4.3% unemployment

• Overnight range 0.7080-0.71365, support 0.6834, resistance 0.7283 0.7661
Shanghai Copper Daily 21-DMA


AUD Daily 55-DMA

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

(Adds headline)

• NY opened near 1.1625 after 1.1662 traded overnight, pair extended its slide

• USD, US yield gains weighed as did USD/CNH's rally to 6.8200

• The USD buying got a boost from drops in gold, silver and equities

• Wider US-German yield spreads added weight on EUR/USD

• EUR/USD fell below Monday's daily low, hit a 1-1/2-month low of 1.1592

• USD selling emerged & riskier assets bounced which helped lift EUR/USD

• The pair rallied toward 1.1610 late in the session, it traded down -0.40%

• Techs are bearish; RSIs indicate downward momentum & EUR/USD is below the 55-DMA

• The monthly inverted hammer for May reinforces the bearish tech signals
eurusd


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

• NY opened near 0.7115 after 0.7177 traded overnight, drop extended in NY

• US yield gains drove broad based USD which weighed on AUD/USD

• USD/CNH rally to 6.8200, drops in gold, silver, copper, stocks also weighed

• AUD/USD fell below the 55-DMA, hit 0.7080 then bounced after Europe's close

• Softer USD, US yields & a bounce in risk lifted AUD/USD toard 0.7110 late

• The pair traded down -0.80% in NY's afternoon & techs leaned bearish

• Falling RSIs, monthly inverted hammer, hold below 10- & 21-DMAs are bear signs
audusd


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

Bank of America Global Research previews the FOMC minutes from the April 29 meeting.

"We expect the FOMC minutes to reinforce the Fed's recent hawkish tone. A growing number of participants are uneasy with strong inflation data and the statement's perceived easing bias," BofA notes.

"While downside labor risks will be noted, the focus should be on persistent inflation and upside risks from Iran. In short, the minutes will likely show that incoming Chair Kevin Warsh inherits a Fed with little appetite to cut," BofA adds.

• Cable fading back from Monday's short squeeze

• GBP squeeze excerbated by Burham's spokesman pushing back on any fiscal rule flexibility

• However, this will not stop markets pricing in the risk of greater gilt issuance if Burnham becomes PM

• As such, elevated gilt yields may remain a drag on GBP if the focus is on fiscal sustainability concerns

• Despite GBP's squeeze higher. Bears will be encouraged by cable's struggle above the 200DMA (1.3426)

• Should keep a return to 1.33 in play. Meanwhile, EUR/GBP should stay underpinned
GBPUSD daily chart


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

JP Morgan Research revised its EUR/USD targets lower and now see the pair heading towards 1.14 by year-end (from 1.20).

"We have pivoted to a bearish-EUR/USD forecast for the first time in a year. Late 2025 and early 2026 saw the dollar on the backfoot, with a second round of Fed easing to support the labor market and US equity momentum / flows turning decisively away from the US. In March, the conflict short-circuited that dollar-bearish environment through a vol spike, deleveraging and ToT improvement. But now, there is evidence that the dollar is gaining support from more organic US-specific developments," JPM notes.

"This skews dollar positive, and EUR/USD negative by extension - we’ve lowered our 2H 26 target range to 1.13-1.15," JPM adds.

• Cable falls to 1.3387 as dollar strengthens amid higher UST yields

• 30-year UST yield rises to 5.18%, its highest level since 2007

• 1.3387 is fractionally fresh intra-day low (1.3388 was London morning low)

• Monday's range was 1.3304-1.3449. UK April inflation data due Wednesday

• Median estimate for UK CPI from a Reuters poll of economists is 3%

• Reuters poll: Only four out of 101 economists expect Fed rate hike this year

GBPUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

Nomura Research maintains a short AUDNZD position targeting a move towards 1.18.

"The AUD outlook appears very mixed in our view. Our RBA view (no further hikes) is somewhat more dovish than current market pricing, and rate spreads do not appear supportive, noting that markets moved this week to price a little more hiking in the US. Positioning data also suggest a balance of long positions, which may be becoming increasingly stale, in our view," Nomura notes.

"Against this, market sentiment appears to rising – with US equities and copper prices making fresh highs this week. Elsewhere, a somewhat firmer USD appears as another headwind, though CNY held up reasonably well last week. We remain a little more positive on NZD, based largely on rate spreads and positioning, and we continue to hold a short AUD/NZD position, albeit with modest conviction (3/5)," Nomura adds.

Goldman Sachs Research remains skeptical on the scope of Japan's MoF intervention to cap USD/JPY upside.

"The biggest headwind to JPY continues to be the broader backdrop of elevated oil prices, US growth outperformance, higher-for-longer rates, and constructive risk sentiment- each of which tend to push up USD/JPY. Currency-negative fundamentals likely explain what appears to be the smaller impact of intervention on USD/JPY per $bn over the two weeks since April 30 compared to the interventions in October 2022 and July 2024, when macro conditions were also pushing in the same direction," GS notes.

 "Overall, we continue to be skeptical that intervention can be successful in driving USD/JPY sustainably lower without a shift towards greater recession concerns or much more hawkish BoJ," GS adds.

• AUD/USD rallied to 0.7177 overnight, sellers emerged, the pair turned negative

• A 3-week low of 0.7109 traded after RBA minutes indicate rates to be on hold

• USD/CNH rally toward 6.8100, drops in gold, silver, stocks added weight on AUD/USD

• NY opened near 0.7120, the pair traded down -0.71% in early action

• Techs lean bearish; daily, monthly RSI indicate downward momentum is in place

• Pair's hold below 10- & 21-DMAs & May's monthly inverted hammer reinforce bear signs
audusd


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

• USD/JPY has risen from 158.70 to 159.17, on Tuesday, according to EBS data

• It is traded through the top of the daily cloud that currently spans 156.38–158.91

• A daily close above the cloud would add to the upside bias and put the focus on 160

• Trading persists above the 158.54 Fibo, a 61.8% retrace of the 160.72-155.00 "intervention" drop

• A simple call option can be used to capture an upswing, mitigate near-term intervention risks

• 30-day log correlation between USD/JPY and EUR/JPY is above +0.5 (pairs moving in tandem)

Daily Chart


(Martin Miller is a Reuters market analyst. The views expressed are his own)

May 19 (Reuters) - The Australian dollar remains highly sensitive to swings in global risk sentiment, particularly those linked to tensions between the United States and Iran. From a technical standpoint, this volatility may be laying the groundwork for a more sustained move lower in AUD/USD.

On the weekly chart, AUD/USD is showing early signs of a head-and-shoulders formation, a classic reversal pattern that typically emerges after an uptrend and can signal a broader move lower.

The structure comprises four elements: a left shoulder, head, right shoulder and neckline. The left shoulder forms as price rallies and then retreats. The head develops when price pushes to a fresh high before pulling back again. The right shoulder is formed if the market rallies once more but fails to surpass the high of the head, creating a lower peak broadly comparable to the left shoulder. The neckline is drawn by connecting the two reaction lows between the shoulders and the head, and it may slope higher, lower, or remain flat.

In AUD/USD, the left shoulder appears to be in place, while the head is still developing. So far, the formation spans roughly 18 weeks of price action, which implies that, if the pattern does complete, it is likely to do so over an extended timeframe rather than quickly. Confirmation would only come if price later breaks and closes below the neckline, at which point a measured downside target could be derived from the height of the pattern.
AUD/USD weekly chart:


(Peter Stoneham is a Reuters market analyst. The views expressed are his own. Editing by Louise Heavens)

• Fin Min Katayama: Japan ready to act on FX volatility, mindful of US bond market impact

• However verbal warnings are unlikely to stop the USD/JPY recovery

• USD/JPY traded above Monday's 156.38–158.91 cloud but failed to close beyond it

• However last Friday saw spot close above the 158.54 Fibo, keeping the bias on the upside

• 158.54 Fibo is a 61.8% retrace of the 160.72 to 155.00 intervention induced (EBS) drop

• A daily close above the cloud top, on Tuesday, would strengthen the bullish outlook

• 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)