USD: Paring some overnight losses
Jun-30 06:28
- The Dollar was in the red against all G10s overnight, but has now edged back to flat against the CAD, EUR, GBP, JPY, SEK, AUD, NOK, ranging from -0.05%/0.10%.
- The Kiwi leads, but by just 0.21%.
- The bigger picture is unchanged, with USDJPY reaching the 145.11 target, printed just 4 pips off that level at 145.07 overnight, as market participants gauge the risk of possible intervention from the BoJ.
- USDJPY test session low post European Govie open at 144.60, as well as EURJPY and GBPJPY.
- EURSEK is flat, but continues to trade close to its record high, which printed as high as 11.8507 Yesterday, according to Bloomberg.
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BUNDS: A busy day ahead
May-31 06:14
- A very busy day ahead, and the fall in the German NRW CPI has already set the tone, and provided a ~50 ticks jump for the German Bund pre cash open with way above average volumes.
- Resistance is at today's high 136.13 (trendline), and a clear break above the latter opens to 136.38.
- Support is seen towards 135.14.
- Today sees, German Regional/National CPI, FR/IT/PO prelim CPI, IT/PO final GDP, US MNI Chicago PMI, JOLTS.
- ECB releases Financial stability review.
- Month End is also decent for the US and the EU, but will be a non event for the UK.
- Eurex roll should also start to dominate in futures.
- SUPPLY: Germany EU3bn 7yr (Equates to 15.6k Bund) should have limited impact.
- SPEAKERS: ECB Muller, Villeroy, Visco, BoE Mann, Fed Collins, Bowman, Harker, Jefferson.
BOE: VIEW: Goldman Adjust Terminal Rate Call Higher
May-31 06:06
Late on Tuesday Goldman Sachs adjusted their terminal Bank Rate forecast to 5.25%, which they expect will be reached in September (previously 5.00% in August).
- They note that “while the BoE has been reluctant to hike further, we believe that persistent inflationary pressures will push the MPC towards more tightening.”
- “Our new forecast is slightly below current market pricing, but remains above the latest available Bloomberg consensus, and we maintain our baseline for no cuts until Q224. We now expect the BoE to raise Bank Rate to a higher terminal value than the Fed - an outcome that has seemed remote but has historically been the norm.”
- “Although market pricing attaches a significant probability to 50bp increments in June and August, we see a high hurdle for a step-up in the pace of tightening.”
- “First, the economy is still digesting most of the tightening in the pipeline, creating an incentive to hike gradually to observe how demand is holding up.”
- “Second, the labour market is rebalancing with vacancy rates falling, employment growth slowing, and the unemployment rate drifting up.”
- “Third, we are sceptical the MPC would find agreement to step up the pace of tightening when other major central banks are approaching the end of their tightening cycle.”
EURJPY TECHS: Pullback Considered Corrective - For Now
May-31 06:02
- RES 4: 152.81 1.50 proj of the Mar 20 - 21 - Apr 6 price swing
- RES 3: 152.00 1.382 proj of the Mar 20 - 21 - Apr 6 price swing
- RES 2: 151.61 High May 2 and the bull trigger
- RES 1: 151.07 High May 29
- PRICE: 149.15 @ 06:59 BST May 31
- SUP 1: 148.84 Low May 24
- SUP 2: 147.43/146.83 13 50-day EMA / 2.0% 10-dma envelope
- SUP 3: 146.13 Low May 11 and a key support
- SUP 4: 145.67 High Mar 31
EURJPY maintains a short-term bullish tone and the latest pullback is considered corrective - for now. Last week’s move higher resulted in a breach of 150.32, 76.4% of the May 2 - 11 sell-off. The break opens 151.61, the May 2 high and a bull trigger. The 50-day EMA, which intersects at 147.43, remains intact and is a key support. A clear break of this EMA is required to signal a reversal. Initial support lies at 148.84, the May 24 low.
