• AUD/USD opens -0.36% despite a rally on Wall Street as banking fears fade

• The 1.5% rise in the USD/JPY broadly underpinned the USD on Wednesday

• AUD/USD traded below the 21-day MA (0.6671 Wednesday) but closed above

• The 21-day MA is at 0.6668 today and a close below adds downward pressure

• More support is at last week's 0.6625 low where bids are tipped

• Key resistance is at the 200-day MA at 0.6753

• AUD/JPY flows out of Tokyo after 1.2% rise will be key for AUD/USD

• For more click on FXBUZ

Morgan Stanley Research maintains a neutral bias on GBP in the near-term.

"We remain tactically neutral on GBP but see risks skewed to the downside. Despite the BoE's hike, its guidance was dovish, with the minutes flagging weaker-than-expected wages and in-line services inflation...Our economists expect the BoE to be done with its hiking cycle now, but incoming data over the next few weeks will remain extremely important for the May rate decision," MS notes. 

"This stands in contrast with the Fed and the ECB where our economists see more 25bp hikes in the coming months. This policy divergence should continue to weigh on GBP and keep EUR/GBP trending higher," MS adds. 

• USD/JPY surged 1.3% in its reversal or March's risk-off bank angst drop

• Haven yen longs abandoned broadly as bank stocks & Tsy yields recovered

• Prices cleared the 55-DMA and cloud top, with 133 the next major hurdle

• That's last week's high, the weekly tenkan and 61.8% of Mar. 15-24 drop

• Bullish O/S and divergent daily RSIs set the stage for this rally

• Above 133 are kijun, 21- & 100-DMAs and two Fibos clustered by 133.80

• Above-f/c US confidence and pending homes sales also supportive

• Jobless claims Thur and core PCE Fri eyed pre ISM, NFP next week

• Also Fed's bank borrowing and deposit data Thur and Fri re bank angst

For more click on FXBUZ

The dollar index rose 0.24% on Wednesday, but largely due to USD/JPY's surge amid widespread unwinding of long haven yen trades as banking sector angst receded further.

The unwinding of flight-to-safety trades became choppier and more focused on selling the yen, which fell more than 1% against the euro and sterling.

The risk-on rebound in Treasury yields found buyers as yields got closer to last week's recovery highs amid a second round of Fed and other U.S. bank regulators being grilled in Congress over recent bank failures.

Thursday and Friday's Fed reports on bank borrowing and deposits will be used to gauge whether the worst of the reactions to recent bank failures has passed.

That will feed into expectations for further Fed hikes and assess whether the sharp H2 cuts that had been priced in recently -- despite policymakers' reluctance to broach the subject of easing -- will continue to be trimmed.

The EUR/USD was close to unchanged and in the middle of Wednesday's 1.08175-872 range on EBS, still shy of last week's 1.0930 peak.
Markets are gauging whether upbeat U.S. consumer confidence, despite March banking woes, is risk-on and haven dollar off or a glimpse at why the Fed's rate path might be higher than currently priced.

USD/JPY rose 1.35% predominantly on yen selling, but earlier also from Treasury yields and stocks both advancing.
The rally now faces resistance by 133 and 133.80, assuming banking angst eases further.

Speculation regarding how and when the BoJ might reduce its extreme easing measures persists, but there's no pressure on its yield curve cap now and cost-push inflation would have to become demand driven for a major policy change.

Sterling fell 0.3% after earlier hitting an eight-week high of 1.2362.

U.S.
core PCE is out Friday, with March ISMs and non-farm payrolls next week.

For more click on FXBUZ

• GBP$ slips into NY cls, -0.23% at 1.2310; NorAm range 1.2362-1.2305

• Pair slips from 8-wk high, holds near trend highs as bank crisis fears ebb

• Sterling bulls pause near 8-week peak to mull next target: 2023 high

• GBP$ up from 1.1805 March low sees profit-taking into month-end

• Further GBP gains hinge on BoE rate expectations amid double-digit inflation

• Res 1.2362 Wed high, 1.2401 Feb 2 high, 1.2448 January's 2023 high

• Supt 1.2283 Mar 28 low, 1.2251 10-DMA, 1.2192 daily low Mar 24

• Bulls in control abv 1.2084, 50% of 1.1805-1.2362

Bank of America Global Research discusses the USD outlook on the back of the recent banking turmoil.

"Banking sector turmoil has introduced significant uncertainty into global financial markets over the past several weeks, with varied impact across asset classes. In FX, the main theme has been modest USD depreciation, though the overall magnitude of bi-lateral moves has been relatively contained.

The primary driver of the dollar's depreciation has been the upending of the outlook Fed policy. While the downward adjustment in policy curves has been global, the repricing has been by a greater magnitude in the US, relative to its G10 peers," BofA notes. 

"Should financial market shocks become more widespread, both geographically and across asset classes, we would still anticipate the USD to outperform most non- "safe haven" currencies, as investors seek liquidity and further reassess policy expectations elsewhere," BofA adds. 

• USD/JPY cleared the daily tenkan by Monday's 131.75 high on Wednesday

• As well as the 55-DMA at 132.42 and now faces last week's 133 high on EBS

• That high is also at weekly tenkan and by 61.8% of the 135.10-129.645 drop

• A close above that resistance should target multiple hurdles by 133.80

• Two Fibos, the kijun and 21- & 100-DMAs are all converging near 133.80

• Thin daily cloud's 132.70 top barely breached before Thursday's twist

• Mon's high and tenkan at 131.75/70 and 200-HMA 131.42 last are props

For more click on FXBUZ

Credit Agricole CIB Research sees a scope for EUR/USD downside in the near-term.

"We continue to see some downside risks for EUR/USD in the near term. In particular, we think that Fed rate hike expectations are in for a rebound after they have been pared back far too aggressively in response to the latest banking sector turmoil in our view. We think that abating banking sector risks and evidence on Thursday and Friday that US inflation remains very ‘sticky’ could be the trigger of a renewed move higher in US rates and yields," CACIB notes. 

"In contrast, potential downside surprises from the Eurozone HICP data on Friday could force investors to reassess their stance on the ECB’s policy from here. To the extent that this leads to lower EUR-USD nominal and real rate spreads, it should add to the downside risks for the EUR," CACIB adds. 

GBP/USD fell on Wednesday but only after hitting an 8-week high of 1.2362 in early U.S. trade, with abating bank-crisis fears combined with the recent softening of Fed rate expectations likely to encourage a run at the 2023 high by 1.2448.

Rate expectations -- whether inflation or crisis related -- have determined recent GBP/USD direction.

The pound slid from early February highs above 1.24 after Fed Chair Jerome Powell affirmed 2023 rate expectations, and as some BoE members shifted to a less-hawkish stance seeking to jumpstart UK growth.

Sterling then rebounded from its 2023 low at 1.1805 as the banking crisis evolved and haven flows pushed Fed rate expectations lower in 2023.

IRPR on Eikon is now pricing 46bp of Fed cuts by the Dec.
13 2023 FOMC meeting, down from near 100bp of cuts at the height of the crisis.

GBP/USD looks destined to take out its 2023 high at 1.2448 on the UK-U.S.
rates convergence theme and as upbeat British economic data provide room for BoE members to keep hiking to arrest double-digit inflation.

For more click on FXBUZ

Nordea Research summarizes its expectations for the Fed and ECB policy trajectories. Nordea targets EUR/USD at 1.10 by year-end.

"We expect the Fed to continue hiking in 25bp increments in both May and June, leaving the peak fed funds rate at 5.25% to 5.50%. We do not see rate cuts until well into 2024. 

We think inflation worries will outweigh any financial stability concerns with the ECB, and see the central bank raising rates by 25bp in each of the following three meetings, leaving the deposit rate at 3.75%," Nordea notes. 

Longer bond yields will likely continue to experience volatility, but we see higher yields ahead in the coming months. The bigger-picture direction for EUR/USD remains upwards," Nordea adds. 

Danske Research maintains a sell-on-rallies bias for EUR/USD.

"Following continued risk-on and a market consensus settling on a single Deutsche Bank CDS trade having sparked Friday's panic-trading EUR/USD is now back at the 1.0850 level. As argued in recent editions we continued to see some near-term topside potential in the cross on fading bank concerns and a relative ECB-Fed repricing potential," Danske notes.

"That said, we still think clients should look at strategic selling opportunities stemming from this rally," Danske adds. 

• Cable climbs to 1.2359 as global equity gains buoy risk-sensitive pound

• 1.2359 is highest level since Feb 2 (1.2400 was high that day)

• GBP also benefits from higher than expected UK Feb mortgage approvals

• BoE vs Fed rate expectations are another source of support for GBP/USD

• Money markets currently see 55% chance of BoE hike in May vs 44% for Fed

• Markets are much more dovish on Fed rates vs BoE in H2 too nL1N3610O7

The Japanese yen is the notable laggard across the FX space with USD/JPY briefly trading above 132.00.

However, with macro news flow relatively light and with the move higher in the pair not confirmed by renewed topside in U.S. yields, recent price action in the yen may be flow related.

Alongside this, today is value month-end, thus there is a tendency for corporate USD demand to have a sway on the currency pair, particularly around the London 4 p.m.
fix.
Seasonality is often bullish USD/JPY heading into the first week of April before the pair peaks around April 4-5th.

That said, while short-term flows appear to be USD/JPY positive, longer term risks remain to the downside.

Money markets are priced for Fed rate cuts FEDWATCH and with credit conditions expected to tighten following the banking crisis, U.S. data could take a turn for the worse going forward.

As such, USD/JPY bears can use this recent upside to re-enter shorts.
Resistance is situated at 132.00 (psychological level) and 132.41 (55DMA).

For more click on FXBUZ

• Cable holds above 1.2300 after higher than expected UK mortgage approvals

• 43,536 vs 40,500 f/c nS8N34807L. 1.2300 is a former resistance level

• 1.2294 was Monday's high. 1.2348 was Tuesday's seven-and-a-half week peak

• UK mortgage approvals beat is boost for hawks advocating higher BoE rates

• Solace for doves via Next expectation for UK clothing inflation to ease

• Offers may emerge pre-1.2400 (Feb 2 high) if GBP/USD extends north

• AUD/USD eyes 0.6669 (Tuesday's low) after extending south from 0.6712

• 0.6712 was Asia high, before softer than expected Australian inflation data

• Up 6.8% YY vs 7.1% f/c. Miss underpins expectation of RBA rate hold April 4

• 0.6712 was highest level since last Thursday (0.6710 was Tuesday's top)

• Support points below 0.6669 include 0.6650 and 0.6625 (last Friday's low)

• Cable remains above 1.2300 as equity gains underpin the risk-sensitive pound

• Nikkei rises 1.3% to highest level since March 10 nL4N3610VL

• 1.2348 was Tuesday's top (high since Feb 2). 1.2341 was last week's peak

• GBP supported by scope for another couple of quarter-point BoE rate hikes

• Money markets currently see 59% chance of 25 bps BoE rate rise in May

• 0#BOEWATCH. GBP/USD bull targets include 1.2400 (Feb 2 high) and 1.2447

• There are three signs on the daily chart that USD/JPY will remain bullish

• The coming "cloud twist" circa 132.50 on Thursday should exert magnetism

• Spot could break above the cloud on Thursday when it resistance region thins

• Friday's failure to hold the break under the 129.74 Fibo is a "bear-trap"

• 129.74 Fibo is a 76.4% retrace of the 127.22 to 137.90 (Jan to Mar) EBS rise

• Large lower shadow on last Friday's candle points to a downside rejection

• EUR/JPY range has been 141.83-143.00 so far, on Wednesday. Trader TGM2336

• AUD/USD drifts lower to 0.6687 in wake of Australia CPI miss

• Inflation cooled faster than expected in Feb nL1N36101G

• Another RBA rate hike in April now seen as unlikely

• Further weakness may hit AUD/USD if it falls through 0.6664

• Breach of 50% retracement will allow room till 0.6615

• Entrance of Bollinger downtrend channel is next support

• For more click on FXBUZ

• AUD/USD opened +0.86% at 0.6708 after USD broadly weakened nL1N3601OC

• It was around 0.6710 when Aus Feb CPI came in lower than expected nL1N36101G

• Data cemented view the RBA will remain on hold when they meet next week

• AUD/USD eased to 0.6687 before getting support from AUD/JPY buying

• Heading into the afternoon it is trading around 0.6700

• Talk of AUD-positive month-end flows underpinning price action

• AUD/USD likely to remain elevated while bank crisis fears fade

• A re-ignition of banking sector fears could see reversal nL4N36103N

• AUD/USD resistance is at the 200-day MA at 0.6754

• A break above 0.6760 would likely see fresh buying

• Support is at the 21-day MA at 0.6672 and break would ease upward pressure

• For more click on FXBUZ

ING Research sees a scope for EUR/USD to reach 1.10 in the near-term.

"We think EUR/USD can retain some bullish momentum on the back of the ECB's hawkish narrative and calmer investor nerves on the European banking situation.

Our view remains that 1.10 can be reached quite soon, although bumps along the way are highly likely," ING notes. 

• EUR/USD opened +0.42% at 1.0845 after USD broadly eased nL1N3601OC

• It was largely ignored in Asia and only managed a 1.0836/49 range

• Most of the action was in EUR/JPY, which rose 0.50% nL1N361020

• EUR/USD resistance at March 23 high at 1.0930 and break targets 1.1034

• Support is at the 10-day MA at 1.0770 where buying is eyed

• EUR/USD likely to remain elevated while equity market steadies

• Bias is for higher while the 10-day MA holds on dips

• Month-end flows may influence price action in coming sessions

• For more click on FXBUZ

The Australian dollar has moved higher against the U.S. dollar this week, as safe-haven strategies entered when the banking crisis flared up were wound back as the panic subsided.
The relief rally may be a selling opportunity before the next wave of the banking crisis unfolds.

Markets calmed this week, after Sunday's sale of Silicon Valley Bank assets and loans to First Citizen Bancshares ended the sweeping sales of bank shares in global markets nL1N35Y0IP.
But if you believe the crisis is far from over and the negative economic impact is still to be felt, selling risk currencies such as the Australian dollar against the safe-haven greenback may reap rewards.

In a Reuters column released Monday.
Jamie McGeever wrote that based on previous U.S. banking crises "the most extraordinary outcome of the March banking shock would be if the problem dissipated quickly." nL8N35W4QG

The AUD/USD rally this week has presented a selling opportunity for bears.
Selling the rally with a stop-loss above the key 200-day moving average at 0.6753 is the favoured strategy.
A daily close below the 21-day moving average at 0.6672 would open the way for a test of the March 10 low at 0.6562.

For more click on FXBUZ

• AUD/USD has dipped below 0.6690 from 0.6710 following softer Aus Feb CPI nS9N34G01A

• Easier CPI read will lock in expectations RBA will remain on hold next week

• Support is at the 10-day MA at 0.6680 and the 21-day MA at 0.6672

• A break below 0.6670 would shift the pressure to the downside

• For more click on FXBUZ

• EUR/USD opens +0.42% after USD eased across the board on Tuesday

• Calm in the banking sector weighed on USD and offset rising US yields nL1N3601OCnL1N36013X

• EUR/USD trending higher with the 5, 10 & 21-day MAs in a bullish alignment

• Resistance @ the March 23 high @ 1.0930 and break targets 2023 high @ 1.1034

• Support is at the 10-day MA at 1.0970 abd break would ease upward pressure

• Talk of month-end USD selling flows may also be weighing on USD sentiment

• Bias is for higher while banking crisis fears subside

• For more click on FXBUZ