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By eFXdata  —  Jun 02 - 08:47 AM

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. 

MUFG Research/Market Commentary
By Randolph Donney  —  Jun 01 - 03:05 PM
  • 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

Chart Click here

Refinitiv IFR Research/Market Commentary
By eFXdata  —  Jun 01 - 03:45 PM

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. 

BofA Global Research
By Randolph Donney  —  Jun 01 - 12:05 PM

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.

Chart Click here

Chart Click here

Refinitiv IFR Research/Market Commentary
By eFXdata  —  Jun 01 - 02:30 PM

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. 

CIBC Research/Market Commentary
By Rob Howard  —  Jun 01 - 10:30 AM
  • 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

GBPUSD Click here

Refinitiv IFR Research/Market Commentary
By Christopher Romano  —  Jun 01 - 09:20 AM
  • 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

aud/usd Click here

Refinitiv IFR Research/Market Commentary
By Randolph Donney  —  Jun 01 - 08:50 AM
  • 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

Chart Click here

Chart Click here

Refinitiv IFR Research/Market Commentary
By Rob Howard  —  Jun 01 - 08:30 AM
  • 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)

EURCHF Click here

Refinitiv IFR Research/Market Commentary
By Martin Miller  —  Jun 01 - 04:55 AM
  • 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

IMM Positions Chart 1: Click here

IMM Positions Chart 2: Click here

EBS Flow Data Chart: Click here

Refinitiv IFR Research/Market Commentary
By Rob Howard  —  Jun 01 - 04:50 AM
  • 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

GBPUSD Click here

Refinitiv IFR Research/Market Commentary
By Jeremy Boulton  —  Jun 01 - 04:40 AM
  • 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

EUR/JPY Click here

Refinitiv IFR Research/Market Commentary
By eFXdata  —  Jun 01 - 01:00 PM

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. 

Credit Suisse Research/Market Commentary
By Richard Pace  —  Jun 01 - 04:35 AM

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.

1m audusd risk reversals Click here

1-week and 1-month implied volatility AUD Click here

AUD/USD overnight implied volatility gets RBA Click here

Refinitiv IFR Research/Market Commentary
By Peter Stoneham  —  Jun 01 - 04:30 AM

A crunch week for the pound could lead to a more aggressive squeeze on sterling shorts.
The latest CFTC numbers show an increase in short positions as Brexit concerns resurfaced and the prospects of negative Bank of England rates attracted fresh selling.
Despite the negatives, GBP/USD has benefited from a weaker dollar and into Friday's close recorded back-to-back bull weeks.
This week sees another round of talks between Britain and the European Union on any possible extension, and although market optimism for an agreement by the end of the month is low, an overly short sterling market is at risk.
Technically, three consecutive monthly hammer candles point to upside cable risk and a return to levels above the 55-MMA, currently 1.3115.
Apart from a false break in December, the average has contained prices since November 2014.
Shorter-term, this week could prove pivotal if the European Union talks reach agreement.
A move above the 1.2466 May 8 high could open up the 1.2644 April 30 peak and 200-DMA at 1.2670.

GBP/USD monthly candle chart: Click here

GBP/USD daily Ichimoku chart: Click here

Refinitiv IFR Research/Market Commentary
Jun 01 - 09:48 PM

EUR/GBP - Dives And Could Go Deep

By Jeremy Boulton  —  Jun 01 - 04:30 AM
  • EUR/GBP always underpinned by month-end buying +2% May 26-29

  • Flows are one-off and so potentially set pair up for a fall

  • EUR/GBP down near 1% last 24 hours

  • EUR/GBP likely to be drawn towards daily cloud twist 0.8887-91

  • Specs are long EUR/USD short cable. Long EUR/GBP and vulnerable IMM/FX

  • This year GBP will be undermined by lack of tourism nL1N2DB0I1

  • Potentially magnetic cloud twist is 1.1290 GBP/EUR. EUR comment nL1N2DE08R

EUR/GBP Click here

Refinitiv IFR Research/Market Commentary
By Rob Howard  —  Jun 01 - 03:45 AM
  • Cable eyes 1.2414 as risk-sensitive GBP benefits from global equity gains

  • See: nL8N2DE129nL4N2DE21F. 1.2414 was 3-week high in Asia nL1N2DE04R

  • USD sentiment negatively impacted by violent protests in U.S. nL4N2DE10B

  • Resistance levels beyond 1.2414 include 1.2427 and 1.2435 (May 11 high)

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

  • IMM specs raise net GBP short position for fifth week in a row nL1N2DE072

GBPUSD Click here

Refinitiv IFR Research/Market Commentary
By eFXdata  —  Jun 01 - 11:30 AM

ANZ Research flags a scope for AUD to consolidate its recent gains in the near-term.

"As a global growth proxy, the AUD has benefitted from re-opening and the swift and explicit policy support from global central banks. With the economic rebound largely priced in, market attention will now shift to other drivers...We think it’s unlikely that the market’s growth assumptions will be challenged in June," ANZ notes. 

"The recent price action, although now at tactical extremes, is more likely to consolidate than materially fall. The near-term risks to the AUD arise from US-China tensions. Our year-end target remains significantly below current levels, reflecting the growth challenges that await when businesses open once again," ANZ adds. 

ANZ Research/Market Commentary
By Jeremy Boulton  —  Jun 01 - 03:20 AM

EUR/USD has breezed through big topside levels, which may suggest the trend is turning, but at this stage of the rally there's cause for caution.
EUR/USD has easily hurdled all the big daily chart levels and on May 29 broke and closed over the base of the weekly Ichimoku cloud.
Excluding what happened during March's turmoil, the last such break in 2017 saw EUR/USD rise over 14%nL1N2DE07T.
The break in March saw the pair rise around 3% to 1.1495.
There is a key difference now: traders are long.
In March, the rise was a short squeeze.
Given the longs, the pace of the current move is impressive; it suggests that this rise where traders are taking a measured approach to longs could prove more sustainable than March's panicked rise.
That said, the downtrend hasn't broken yet.
That probably requires a close over the weekly cloud at 1.1225 and 100-WMA at 1.1222.
A close below 200-DMA at 1.1012 would confirm a top.

EUR/USD Click here

EUR/USD Click here

Refinitiv IFR Research/Market Commentary
By Martin Miller  —  Jun 01 - 03:15 AM
  • USD/JPY continues to trade within the thick 106.71-108.41 daily cloud

  • Friday's setback found support at 107.06 on the EBS before rebounding

  • Friday's low was just ahead of kijun line that remains at 107.04

  • USD/JPY looks set to break the upper bounds of cloud in coming sessions

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

  • USD/JPY Trader TGM2336. EUR/JPY range has been 119.67-119.96 on the EBS

  • EUR/USD bulls eye key Fibo resistance after large gains nL1N2DD09H

Daily Ichimoku Chart: Click here

Refinitiv IFR Research/Market Commentary
By eFXdata  —  Jun 01 - 11:00 AM

MUFG Research adopts a constructive bias on EUR/USD in the near-term.

"The European Commission’s proposal for the Recovery Fund has reinforced investor confidence in euro-zone assets and the euro...In the interim it increases pressure on the ECB to deliver further support," MUFG notes. 

"In these circumstances, we expect the EUR to continue trading on a firmer footing in the near-term. EUR/USD appears set to test the top of the 1.0800 to 1.1200 trading range. However, it may still be premature to turn outright USD bearish," MUFG adds. 

MUFG Research/Market Commentary
By Martin Miller  —  Jun 01 - 02:55 AM

Changed "insight" to "in sight" in title

  • EUR/USD last week saw a daily close above the Ichimoku cloud top at 1.1066

  • That unmasks the 1.1167 Fibo, 61.8% of 1.1495 to 1.0636 March (EBS) drop

  • Through the 1.1167 Fibo will put the 1.1240 March 16 high within reach

  • Tenkan and kijun lines are positively aligned = bullish market structure

  • We have raised our bid to 1.1070 in order take advantage of near-term dips

  • EUR/USD Trader TGM2334. Previous update nL1N2DB0DA

Daily Ichimoku Chart: Click here

Refinitiv IFR Research/Market Commentary
By eFXdata  —  Jun 01 - 09:45 AM

Credit Agricole Research flags a scope for further EUR upside, and likes to express that via a long EUR/AUD position in spot targeting a move towards 1.76.

"The European Commission’s proposal for the EU recovery fund reinforced the burden sharing elements of the earlier Franco-German proposal and went beyond it in terms of overall size. We remain hopeful that the final version of the fiscal package approved by the EU heads of state in June would keep these positive features. The Eurozone stock and peripheral bond markets rallied in response to the proposal," CACIB notes. 

"The EUR regained ground across the board and we expect the EUR to remain supported vs less liquid, risk-correlated currencies with exposure to China like the AUD and NZD," CACIB adds. 

Crédit Agricole Research/Market Commentary
By Jeremy Boulton  —  Jun 01 - 02:50 AM
  • On May 29 EUR/USD closed over base weekly Ichimoku cloud at 1.1103

  • First close above base under normal conditions since downtrend began in 2018

  • Last similar break in May 2017 saw EUR/USD rise over 14% in 37 weeks

  • A close over weekly cloud @ 1.1225 and 100-WMA at 1.1221 may confirm repeat

  • At this stage picking tops with tops above cloud looks a cheap bet

  • Considering traders long pace of gains is a very bullish sign IMM/FX

  • Specs will likely prefer to buy dips ahead daily cloud top @1.1065

  • Close back below 200-DMA @ 1.1012 needed to end this bullish phase

EUR/USD Click here

Refinitiv IFR Research/Market Commentary
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