• Trades wholly within thick 106.71-108.23 cloud for seven sessions in a row

• Fri's setback found support at 107.06 on the EBS, ahead of kijun at 107.04

• USD/JPY looks likely retest the upper bounds of the cloud top

• Tenkan and kijun lines are positive aligned, reinforcing the bullish bias

• USD/JPY Trader TGM2336. EUR/JPY range has been 119.65-120.01 on the EBS

• EUR/USD break above a key Fibo will unmask the March 16 high nL1N2DF07Q

• Cable rises to 1.2554 amid a ray of light before latest EU-UK trade talks

• 'We'll compromise if you do too, Britain tells EU' - The Times nFWN2DE0TG

• 1.2554 is the highest level since May 1 (1.2600 was the high that day)

• Recent GBP losses were influenced by pessimism about the EU-UK trade talks

• UK PM Johnson plans talks with EU's von der Leyen this month-FT nFWN2DE0PZ

• 1.2525 (Asia high) and 1.2506 (Monday's high) are now GBP/USD support levels

Credit Suisse discusses GBP/USD technical outlook and flags a scope for a retest of key resistance at 1.2643/71.

"GBPUSD has seen another strong push higher following the break above its downtrend from early March, helped by the weakening USD, with strength having extended to the 78.6% retracement of the April/May fall at 1.2522. Whilst this should be allowed to cap at first for a pullback, the risk stays seen higher for a break in due course for a fresh challenge on what remains seen as more significant resistance from the April highs and 200-day average at 1.2643/48 and 1.2671 respectively. We would again expect significant sellers to show here," CS notes. 

"A close above 1.2671 though would instead suggest we are seeing a more significant turn higher, with resistance seen next at 1.2711 – the 78.6% retracement of the March collapse. Support for a pullback is seen at 1.2457 initially, then 1.2426, with 1.2375 now ideally holding to keep the immediate risk higher. A break can see a deeper retracement lower to 1.2330/22, but with better buyers expected ahead of here," CS adds. 

• RBA unchanged - statement nAZN00F1YN -0.2% pre RBA - E-mini S&P -0.4% led

• Possible that the depth of the downturn will be less than earlier expected.

• Economic outlook highly uncertain, likely long-lasting effects on economy

• No real surprises, caution rules - AUD little changed around 0.6790

• Charts; momentum studies, 5, 10 & 21 DMAs track north - positive setup

• 21 day Bollinger bands a good indicator of an over stretched market

• Upper Bollinger band at 0.6768 suggests buying dips not breaks

• 0.6715 NY low then 0.6656 200 DMA are initial support

• Flat towards the base of a 1.2484-1.2525 range with plenty of flow

• Early gains evaporated as E-Mini S&P fell 0.6% on US protests nL1N2DE0M9

• Times - UK to compromise on fisheries if EU eases demands nFWN2DE0TG

• Current cable bounce is all about USD weakness, risk on, not GBP strength

• Charts; momentum studies climb, 5, 10 & 21 DMAs base-rise, positive setup

• 1.2499 upper 21 day Bollinger suggests overbought - buy dips not breaks

• Earlier 1.2525 high then 1.2648 April high, initial resistance

• London 1.2377 low then yesterday's 1.2329 base first supports

• -0.3%, as risk appetite eases, E-Mini S&P -0.6% on US protests nL1N2DE0M9

• Positive local markets, Nikkei +0.85%, AsiaxJP +0.2% and Brent crude +0.4%

• No RBA change at 97.5% on OIS, may comment on TWI at pre coronavirus levels

• Charts; momentum studies, 5, 10 & 21 DMAs track north - positive setup

• 21 day Bollinger bands a good indicator of an over stretched market

• Upper Bollinger band at 0.6767 suggests buying dips not breaks

• Earlier 0.6817, then 0.6879 Jan 23rd highs first resistance

• 0.6715 NY low is initial support

• -0.05% after closing +1.1% with a broadly softer USD - E Mini S&P -0.4% caps

• UK PM plans Brexit talks with EU's von der Leyen - FT nFWN2DE0PZ

• Fundamental change in EU or UK stance required for compromise - unlikely

• Current cable bounce is all about USD weakness, risk on, not GBP strength

• Charts; momentum studies climb, 5, 10 & 21 DMAs base-rise, positive setup

• 1.2500 upper 21 day Bolli suggests overbought - buy dips not breaks

• NY 1.2506 high then 1.2510, 76.4%% April May fall initial resistance

• London 1.2377 low then yesterday's 1.2329 low first supports

  
  

  
  

TD Research flags its key trading opportunities in the month of June. 

"Lockdown exits have priced in too much optimism versus economic realities. Staggered US reopenings should intensify political pressures while the rhetoric between the US and China ratchets upward. European developments reduce the EUR's medium-term tail risks but create headaches for GBP, which has a twin deficit and Brexit problem," TD notes. 

"We maintain a defensive posture, remaining long USD, JPY versus GBP, EUR...NOK remains attractive on positioning and valuation, favoring topside against GBP and SEK. AUD still remains vulnerable in the short-run, suggesting short-term tops in AUDCAD and AUDNZD," TD adds.

• Flat after closing +0.2%, below key resistance, amid broad USD weakness,

• UK PM plans Brexit talks with EU's von der Leyen - FT nFWN2DE0PZ

• Fundamental change in EU or UK stance required - no signs it is likely

• Charts - momentum studies, 5, 10 & 21 DMAs head north - positive setup

• 1.1145 rising upper 21 day Bolli a good indicator of an overbought market

• 21 day Bollinger suggests buying dips not breaks at these levels

• 1.1148-1.1166, major resistance close - late march high and 61.8% March fall

• 1.1100 870M strikes and early Europe 1.1154 high initial support-resistance

• AUD/USD opens 1.9% higher as economic data from U.S., China boosts sentiment

• Economic recovery hopes offset jitters over U.S civil unrest, U.S-China ties

• Easing of lockdowns in Australia, hopes of more govt stimulus fuel rally

• Commodities rally quickens gains; copper @ 3-month high, Dalian iron ore +6%

• RBA meets Tuesday, expected to sound upbeat on economic recovery prospects

• Strong resistance 0.6823,50% of 2018-2020 drop; break opens 100-WMA @ 0.6924

• Support 0.6740-50, 0.6710-20, pivotal at 0.6675-85

MUFG Research discusses the USD outlook in light of its sharp decline across the board. 

"The dollar depreciation in May was telling – in particular, the drop in the final week of the month was the largest weekly decline for the dollar (on DXY basis) since Jan 2018 when we were in the final leg of the dollar sell-off vs EUR from around 1.0600 to close to 1.2500. Back then (better EZ growth) like now (Recovery Fund) there were EUR factors but the dollar has sold off more broadly as well and the continued improvement in financial market conditions opens up the dollar to being exposed to the aggressive monetary stance implemented by the Fed to alleviate dollar illiquidity risks," MUFG notes. 

"The technical and fundamental backdrop has certainly worsened for the dollar but we are reluctant at this stage to make changes to our dollar depreciation forecasts which are starting to look cautious. The prospects of a risk correction are high which would prompt some reversal of this USD weakness. We are reluctant to materially adjust lower our USD levels vs EUR at this stage given the uncertain outlook and high level chance of a risk correction. Still, the fundamental backdrop for the dollar is deteriorating," MUFG adds. 

• USD/JPY is statistically ripe for a range breakout nL1N2DE15I

• Stuck above 107.03 kijun, below blizzard of 108.08+ resistance

• 107.83 EBS high again capped by the upper 10-day Bolli band

• Tenkan takes first dip since May 8 to 107.52, pivotal on close

• Real action's in yen crosses, AUD/JPY above 200-DMA nL1N2DE0RQ

• Biggest IMM net short since September getting squeezed

• EUR/JPY's broken 2020 down TL used as support at today's 119.42 low

• 120 seen as a major pivot point ahead of March's 121.14 high

Bank of America Global Research discusses EUR/USD technical outlook and highlights the importance of the 1.1165 level for near-term direction. 

"The DXY and EUR/USD saw a narrow trading range in April and May. These ranges have broken with month end flows driving EUR/USD through the 200d SMA at 1.1012 and the DXY below 98.52. Such breaks suggest these trends can continue in the short term. However, the last day of May formed a hammer candle on the DXY chart. This has a bullish interpretation for the first week of June," BofA notes. 

"Since the euro has yet to eclipse resistance from the March 30 high of 1.1165 plus the aforementioned bullish hammer for the DXY, it will be key for euro to break this resistance to see the trend accelerate higher in June. Resistances above that are 1.1280/1.1290, 1.1360 and 1.1450. DXY supports are at 97.83, 96.65 and 96.20," BofA notes. 

USD/JPY's standoff above the daily kijun at 107.035 and below major resistance by 108.08 looks likely to end soon, perhaps a good time to go long vol.
Daily highs have been contained by the upper 10-day Bolli band since May 19's 108.085 EBS high, while Bolli band spreads have narrowed to 4-1/2-year lows, suggesting a breakout is probable.
Aside from May's high and April 16 and 17 highs at 108.085, the 61.8% Fibo of the April-May drop and the 50-WMA are also at 108.08.
Beyond are the 38.2% Fibo of the March-May slide, Tuesday's daily cloud top and the 200-DMA at 108.17-34.
The weekly cloud base is steady at 107.95 until late June.
Into this resistance, IMM specs have increased their net spec short position to its biggest in 4-1/2 years.
With May reopening, early June high-frequency data ahead, U.S.-China tensions and the U.S. and Japanese stock markets closer to record highs than pandemic lows, a lot must go right to clear 108+ hurdles on rising Treasury yields and risk-on yen selling.
Nearby breakout targets are 109.38 topside -- less likely -- and 106 after a sub-107 close.

CIBC Research adopts a cautious bias on AUD around current levels. CIBC targets AUD/USD around 0.65 in Q3.

"Despite the ‘feel good’ tone for the AUD, there are headwinds looming. For one, the current spat with China (Australia’s most important trading partner) over barley, meat and suspicion with respect to messaging over COVID19, could threaten inward investment from China at the margin. Additionally, prior yield advantages are no longer there, and the AUD is expected to benefit far less from speculative flows relative to the past," CIBC notes. 

"Finally, trends toward de-globalization will naturally harm commodity proxies in the currency markets – including the AUD. An earlier than anticipated dose of optimism has forced us to revise our AUD and NZD forecasts higher. As that confidence is tested, we see a stable environment for the AUD this year," CIBC adds. 

• Cable hits 1.2476 as more shorts cover after 1.2427 resistance level break

• 1.2476 is the highest level since May 5 (1.2483 was the high that day)

• 1.2427 was 61.8% Fibo of 1.2644 (Apr 30 high) to 1.2075 (May 18 low)

• IMM speculators upped net GBP short for 5th week in a row in week to May 26

• See: nL1N2DE072. Offers may emerge near 1.25 if GBP/USD extends north

• White House calls for 'law and order' as violent protests rage nL1N2DE0M9

• China Caixin PMI nL4N2DB1AM, copper & iron-ore lift AUD/USD overnight

• US-Sino trade tensions sour risk Click here , some gains erode

• Pair falls from 0.6772 high toward intra-day support near 0.6720

• Pair is still up over 0.75% on the day & technicals remain bullish

• RSIs rise, pair above 200-DMA and 76.4% Fib of 0.7032-0.5510 pierced again

• Close above the Fibo & 200-DMa should bolsters bullish sentiment

• Feb's 0.6774 monthly high is an impediment, if breaks 0.7020/40 is targeted

• EUR/USD's recovery hits 1.1154 on EBS, barely past March rebound high

• Long wick on today's candle so far with big data and ECB this week

• Nearly analogous dollar index rebounds off 61.8% Fibo of March wide

• Markets trying to stay risk-on, USD-off, downplaying US-China tensions

• Also global PMIs recovering, but still deeply in contraction

• U.S. Manufacturing ISM the main event risk today, NFP on Friday

• ECB Thursday seen upping relief efforts by EUR500 bln

• EUR/USD, USD back to where Fed squelched USD funding squeeze in March

• Cloud top at 1.1065 and 200-DMA at 98.51 key dollar hurdles now

• Bullish 10-year BTP-Bund yield spread tightening, but more slowly

• Net CHF long position held by IMM specs ticked up to 8,739 in week to May 26

• 8,739 contracts = biggest net CHF long position since June 2016

• Fractional rise in net CHF long preceded EUR/CHF jump to 1.0726 (EBS) Friday

• 1.0726 = 16-week high. IMM specs have been net CHF long since early March

• SNB fx intervention helped to keep EUR/CHF above 1.0500 in April and May

• See: nL8N2CS0CC. 1.0505 was 58-month low for EUR/CHF on May 14 (EBS)

• IMM data shows the speculative USD/JPY short grow in the week ending May 26

• The IMM net speculative short was $4.0B up from $3.2B the previous week

• Last week's $4.0B position was the biggest short since November 1 2016

• EBS flow data since May 26 shows the short may well have grown even bigger

• USD/JPY has relapsed from 107.85 to 107.38 on Monday (EBS prices)

• But expect eventual USD/JPY gains above cloud supply at 108.41 nL1N2DD09F

• EUR/JPY's correlation with USD/JPY high, 30/60-day logs are +0.62/+0.64

• Cable met headwind at 1.2425 after vaulting 1.2414 (Asian session high)

• 1.2425 is two pips shy of a 61.8% Fibo resistance level nL1N2DE09F

• Ascent to 1.2425 (three-week high) influenced by global equity gains

• See: nL8N2DE1FSnL4N2DE22L. GBP often benefits when stocks rise

• Retreat from 1.2425 based four pips shy of 1.2385 (early Ldn low)

• UK May final manufacturing PMI 40.7 vs 40.6 flash estimate nZRN000H04

• EUR/JPY high today 119.96. Friday 119.90 (EBS)

• 120 is a crucially important level for hedging

• Option and corporate supply around 120 will be large

• Highs since Feb have been circa 121. Lows near 114.50

• Current levels sure to draw additional spec supply, esp Japanese

• Japanese retail will likely front run corp/option sellers

• Stop placement likely to be above 120.50 or 121.00

Credit Suisse abandons its bearish EUR/JPY bias and no longer targets the cross at 112 over the coming weeks.

"As for our risk aversion trades in G10, short EURJPY is unlikely to perform while equity markets stay resilient but more importantly if the longer-term risk premium required for EUR declines," CS notes. 

"But we are still reluctant to shift our USDJPY 105 medium-term target given the lack of yield support the greenback now has relative to the JPY and the cheapness of hedging USD exposure for Japanese investors. This means we now target EURJPY 117.60, up for 112.00 previously," CS adds. 

The Reserve Bank of Australia policy announcement comes early Tuesday, and while markets aren't expecting anything new, AUD/USD options remain poised for more volatility.
The RBA is likely to reassert its commitment to do more if required but should confirm its sees no need at the moment.
The interest rate has already been cut to 0.25%, and OIS pricing suggests it will stay there over coming months, so reaction to the announcement should be minimal.
However, FX options are poised for more volatility, with AUD/USD moving a lot/gaining Monday, which does favour options, even without the RBA.
Overnight expiry (Tuesday at 10 a.m.
New York) implied volatility is around 18.0 - a break-even for straddles of 0.75% of AUD, or 51 USD pips in either direction.
One-week implied volatility has recovered the mid 12.0s from 10.0, and one-month 11.0 from 10.4 crisis lows on Wednesday.
One-month risk reversals show AUD put over call implied volatility premium at crisis lows of 1.65, as AUD downside risk exposure is further reduced.