FOREX: USD Decline Accelerates on Fed Speculation
Jun-26 09:37
- The weakness for the USD persists through the European morning, with the greenback comfortably lower against all others in G10. As such, the impulsive bull phase across most major pairs continues, resulting in EUR/USD, GBP/USD and others breaking to new highs.
- For GBP, the price has shown through 1.3750 and, as such, above the January 2022 high - this is keeping resistance at 1.3757 under pressure, above which resistance is scant through 1.38. In line with the extension of USD weakness, EURUSD has pushed through the overnight highs and now trades at the highest level since September 2021. While Trump’s rhetoric regarding the Federal reserve remain a key driver of the moves in G10 FX this morning, the Euro has been consistently displaying resilience.
- Dips for EURUSD have remained shallow, and short-term moving averages have underpinned the move well, best evidence being Monday’s test and subsequent surge off the 20-day EMA.
- For USD/CHF, meanwhile, the latest weakness has extended on a break of key support at 0.8040, the Apr 21 low, confirming a resumption of the medium-term technical downtrend. Furthermore, the pair has breached the psychological 0.8000 mark, representing the lowest recorded level since the removal of the EURCHF floor in 2015.
- Focus ahead turns to the advance US retail sales release, tertiary GDP stats and weekly jobless claims for the latest week. BoE's Bailey is set to speak again, while ECB's Schnabel speaks from Frankfurt. The Fed schedule is busier, with Goolsbee, Barkin, Daly, Hammack and Barr all on the docket.
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FOREX: Global Curve Dynamics Roil Currencies, USD/JPY Rallies 1.3%
May-27 09:26
- Global bond markets and the shape of yield curves remain the key driver for currencies, as renewed volatility in the JGB market triggers a slump in the JPY and a broad USD rally. According to sources, the Japanese Ministry of Finance solicited market opinions on the curve and the government's issuance approach via a questionnaire - triggering broad speculation that the government would re-orient away from longer-end issuance.
- The ensuing bull-flattening of the Japanese curve worked against the JPY, boosting USD/JPY by over 1.3% off the overnight low, and well within range of the Y144.00 handle. A close at current or higher levels for the pair would snap the short-term downtrend that had reversed the pair off the Y148.65 mid-May high. The initial resistance zone at 144.40, last Thursday’s high and the 20-day EMA. Above here, the 50-day EMA currently intersects at 145.73.
- EUR losses posted off the back of a lower-than-expected French CPI miss are holding, with a new pullback low at 1.1341, dipping the price below the Friday close - and reversing the entirety of the gains posted off the Trump EU tariff threat delay from yesterday. USD strength is also playing a part here - dollar's rallying alongside equities as the inverse relationship between yields and the currency continues - with strong USD/JPY demand adding an extra tailwind.
- Technically, EUR/USD sees scant support until 1.1271, the 20-day EMA, meaning today's dip lower is counter-trend. But a clear break below here would highlight a stronger reversal and signal scope for a deeper retracement. EUR/GBP meanwhile is testing major support at the 200-dma of 0.8383. This level was briefly pierced intraday last week, but hasn't sustained a break below since March earlier this year. Weakness through 0.8380 would result in the lowest print since April 3rd.
- Focus for markets Tuesday rests on prelim durable goods orders and May consumer confidence from the US. Fed's Barkin and ECB's Nagel make up the Fedspeak.
FOREX: USDJPY Extends Intra-Day Recovery to 1.25%
May-27 09:25
- The greenback trades on a firmer footing on Tuesday alongside the step lower for long-end core yields and the prevailing optimism for major equity benchmarks. As noted, long-end JGBs are outperforming after Reuters sources suggested the MOF will consider skewing the composition of its current issuance programme away from super-long-end instruments.
- This dynamic has helped USDJPY extend its intra-day recovery to around 1.25% on the session, narrowing the gap to the initial resistance zone at 144.40, last Thursday’s high and the 20-day EMA. Above here, the 50-day EMA currently intersects at 145.73.
- Overall, USDJPY maintains a softer tone and the pair has traded to a fresh short-term cycle low today. Support at 142.36 has been pierced, and a clear break of it would open 139.89, the Apr 22 low and the next key support. We wrote a detailed technical note on the significance of this medium-term pivot: https://mni.marketnews.com/3HsU8xu
- Speaking this morning at the 2025 BOJ-IMES Conference, Governor Ueda said “we have managed to de-anchor expectations from zero, but have yet to re-anchor them at 2%. This is why we are still maintaining an accommodative policy stance." Emphasising this caution, Finance Minister Katsunobu Kato indicated the MOF will monitor developments in the bond market, including super-long bonds, and maintain close communication with market participants to ensure appropriate bond management.
ITALY AUCTION RESULTS: BTP Short Term / BTPei
May-27 09:16
| 2.55% Feb-27 BTP Short Term | 1.25% Sep-32 BTPei | 1.80% May-36 BTPei | |
| ISIN | IT0005633794 | IT0005138828 | IT0005588881 |
| Amount | E2.75bln | E1bln | E1bln |
| Previous | E3bln | E600mln | E1.5bln |
| Avg yield | 2.01% | 1.24% | 1.90% |
| Previous | 2.00% | 0.38% | 1.90% |
| Bid-to-cover | 1.61x | 1.57x | 1.59x |
| Previous | 1.65x | 2.82x | 1.61x |
| Avg Price | 100.93 | 100.10 | 99.06 |
| Pre-auction mid | 100.913 | 100.023 | 98.977 |
| Prev avg price | 101.00 | 110.70 | 99.08 |
| Prev mid-price | 100.982 | 99.005 | |
| Previous date | 24-Apr-25 | 25-Feb-20 | 25-Feb-25 |
