• FX option implied volatility meets demand after setbacks from recent highs

• Benchmark 1-month expiry EUR/USD paid 5.9-5.95 early Thursday

• Contract up from late 2021 lows at 4.9 late March to 7.15 mid April high

• Mid-east related risk aversion and USD gains lifted implied vol/demand

• 1-month daily realised vol (fair value measure) is currently 6.2

• 3-month and 1-year implied vols also half-way between recent highs and lows

• 1-week expiry implied vol elevated by May 1 FOMC inclusion nL2N3GY0M6

• Focus on JPY and BoJ intervention risk on Friday nL2N3GY0P9nL2N3GY0TW

For more click on FXBUZ

• Cable rises to 1.2516 as the pound benefits from BHP-Anglo news

• Australian miner BHP makes $39 billion bid for London-listed Anglo American

• 1.2516 is highest level since April 12 (1.2558 was high that day)

• It is also more than two cents above Monday's five-month low of 1.2299

• US Q1 GDP data due at 1230 GMT; growth of 2.4% is consensus forecast

• Scotland's SNP-Green government coalition collapses - Sky News nL5N3GY32B

• EUR/USD recently failed under 1.0611 Fibo, ahead of the 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

• We are short at 1.0725 for a slump, our stop is above kijun line at 1.0772

• EUR/USD Trader TGM2334. Previous update nL2N3GX0LY

• USD/JPY rose to break and register a weekly close above the huge 152.60 Fibo

• 152.60 Fibo, a 38.2% retrace of major 277.65 to 75.31 (1982 to 2011) drop

• That is a very bullish sign, backed by continued positive 14-week momentum

• Scope for much bigger gains to eventually retest the 160 psychological level

• A fall and weekly close under 152.60 Fibo would be a negative development

• USD/JPY Trader TGM2336. EUR/JPY 166.06-166.87 EBS range on Thursday

• AUD/USD extends modest gains to 0.6512 from 0.6498

• Advancing toward 200 DMA resistance at 0.6528

• That chart barrier deflected it lower on Wed

• Rally steered by AUD/JPY and other yen crosses soaring

• Fear of intervention fades as 155.00 breached uneventfully

• Traders see 160.00 as the new USD/JPY line-in-the sand

• For more click on FXBUZ

• A marginal new high for the reversal from Monday's hammer candle

• Climb to 1.2470 allows us to raise our long stop to 1.2395 entry

• Our target tightened to 1.2550, ahead of the 200DMA

• Fourteen day momentum remains negative and daily RSI flattening out

• Recent high close to market and could resist further gains

• Will hold long for now but will monitor any test of the 1.2484-98 area

  For more click on FXBUZ

• AUD/USD hits an intraday high of 0.6511 from low of 0.6493

• Pulled up by AUD/JPY cross as USD/JPY hits new decades-high

• Briefly pops above 0.6503, the 50% retracement of April drop

• But retreats to 0.6502 as 200 DMA resistance 0.6528 bears down

• Australia financial markets closed Thurs; liquidity thinned

• Yen weakens past 155.00 vs USD before BOJ decision Fri

• For more click on FXBUZ

Synopsis:

ING reports a significant reaction in the Australian dollar following higher-than-expected inflation data for Q1. The inflation figures, showing sustained high core rates and a headline rate of 3.6% YoY, have led to adjustments in monetary policy expectations and bolstered the AUD.

Key Points:

• Inflation Data Overview: Australia's Q1 inflation data surpassed expectations, with core inflation measures remaining above 4% and the headline rate decelerating slightly to 3.6% year-on-year. The March CPI specifically exceeded forecasts at 3.5%, against a consensus of 3.4%.

• Market Reaction: Following the release, Australia’s two-year swap rate saw a significant jump of about 15 basis points, reaching its highest level since November 2023. This reflects a shift in market expectations, notably pricing out any rate cuts for the remainder of the year, leaving only a minimal 8 basis points of easing expected by the December meeting.

• RBA Policy Outlook: Despite the hot inflation figures, ING assesses that another rate hike is not entirely necessary, suggesting that the Reserve Bank of Australia (RBA) might achieve its inflation targets without further rate increases. However, the central bank is expected to approach any dovish policy shifts with increased caution given the persistent inflation pressures.

• Impact on AUD: These developments have positively impacted the Australian dollar, which has climbed back above the 0.6500 mark. The AUD is positioned to benefit from delayed policy easing expectations and remains one of the currencies likely to be supported in a stable risk environment, albeit still vulnerable to shifts in global risk sentiment.

Conclusion:

The recent Australian inflation data has notably shifted market dynamics and monetary policy expectations, strengthening the AUD against major counterparts. ING highlights that while the RBA may avoid further rate hikes, cautious communication will likely prevail due to the ongoing inflation concerns. 

• USD/INR to open up, rally in USD/JPY above 155 leads; DXY, UST yields rise

• Pair closed at 83.32, likely to open around 83.37, NDFs last at 83.39-83.44

• DXY last at 105.77, US March durable goods rise 2.6% nL2N3GX27Q

• 10yr UST yield bounces off 4.60% to 4.65%, eyes Q1 GDP data nL2N3GX1ZO

• USD/INR supports at 83.30, stronger at 83.20; resistance 83.40, 83.50

• Related nL3N3GY0F8

• For more click on FXBUZ

• AUD/USD edges up to 0.6504 from Wed close 0.6498

• Could have another go at testing 200 DMA resistance 0.6528

• Break of that barrier may send it past 61.8% Fibo 0.6537

• Dollar a touch softer in Asia despite equities risk-off

• Yen crosses may be fuelling the move as yen weakens more

• Australia financial markets closed Thursday

• For more click on FXBUZ

• USD/KRW jumps to 1376.2 from Wed close 1369.2; Kospi -1.1%

• Bollinger uptrend channel engaged on close above 1381.1

• Triggered by USD/JPY surging past 155.00 line-in-the-sand

• Yen weakening to new decades-low pulls KRW, CNH along

• S. Korea Q1 GDP smashes forecasts at +3.4% y/y nP8N3EO001

• Early BOK rate cut seems even more unlikely now

• For more click on FXBUZ

• USD/SGD opens higher, tracks higher DXY, USD/JPY nL2N3GX27Q

• DXY last at 105.82, traded 105.59-95 range overnight

• US March durable goods orders rise 2.6% nL2N3GX1F6

• UST yields rise ahead of Q1 GDP, 10yr yield last 4.64% nL2N3GX1ZO

• USD/SGD traded 1.3607-24 range in NY, closed at 1.3620

• Supports 1.3570, 1.3550; resistance 1.3650, 1.3670

• Related nL2N3GX2SP

• For more click on FXBUZ

• AUD/USD rally deflected by 200 DMA resistance on Wed

• Key barrier at 0.6528 might prove resilient for now

• Consolidation lower toward 38.2% Fibo 0.6470 may ensue

• Pullback cued by UST yields rebounding, renewed JPY weakness

• USD/JPY spikes through 155.00 despite FX intervention threat

• BOJ meeting concluding Fri eyed; Australia closed Thurs

• For more click on FXBUZ

Synopsis:

HSBC analyzes the implications of potential intervention by Japan to support the yen, noting that such actions could significantly affect the USD/JPY exchange rate. Despite a general trend of a strengthening USD, the bank highlights several factors that might moderate the currency pair's movements.

Key Points:

• USD Strength Against G10 Currencies: HSBC expects the USD to gradually strengthen against most G10 currencies in the coming weeks, influenced by various macroeconomic factors. However, the pace of appreciation might be moderated by the market's anticipation of potential intervention from Japan's Ministry of Finance (MoF) to support the yen.

• MoF Rhetoric and Market Sentiment: Continued statements from the MoF regarding the stability of the JPY, along with recent international discussions on currency volatility, have helped stabilize the JPY against a rising USD. The meeting between the finance ministers of Korea, Japan, and U.S. Treasury Secretary Yellen emphasized a shared commitment to monitoring and potentially acting on rapid movements in the JPY and KRW.

• Impact of Potential Intervention: HSBC suggests that any actual intervention by Japan to support the yen could have a significant, albeit potentially short-lived, impact on the USD/JPY exchange rate. The current market positioning and valuation stretch make USD/JPY particularly sensitive to intervention.

• Yield Gap and Market Reactions: Following any potential intervention, the yield differential between the US and Japan could prompt renewed buying of USD/JPY, potentially offsetting some of the initial effects of the intervention.

• Speculative Market Positioning: HSBC’s flow data indicates that speculative accounts have predominantly been selling USD/JPY over the last month. This suggests that the market positioning might not be as heavily skewed towards a weaker yen as previously thought, which could influence the effectiveness and consequences of any intervention.

Conclusion:

While HSBC anticipates a general strengthening of the USD against G10 currencies, the bank underscores the significant role that potential Japanese intervention could play in shaping USD/JPY movements.

• USD/JPY buyers took the leap of faith with a rise above 155

• Had been fear Japan's MoF/BoJ would intervene near there

• That after this year's 10% rise to 34-year highs prompted MoF warnings

• Prices have now cleared 161.8% Fibos off 2023 lows by 155.20

• A 155.20-plus close would create space for a run at 156 next

• But a rise to 1990's 160.35 high will need more solid US data fuel

• An LDP official noted there's no talk about intervention levels yet

• Party executive Takao Ochi said a slide to 160, 170 may be deemed excessive

• Bulls are happy to hang on given the attractive carry trade

• Downside risk would have to come from U.S. data misses, faster Fed rate cuts

• US Q1 GDP on Thur may beat f/c as Atlanta Fed GDPNow favors bigger increase

• Bigger event risk comes from Fri's core PCE, next Fri's payrolls

• Also have Tokyo CPI and BoJ on Friday, but no key policy news is expected

For more click on FXBUZ

• 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

For more click on FXBUZ

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