The US dollar rally is losing momentum near resistance, although bullish May seasonality suggests DXY could still retest 99.

By :  Matt Simpson,  Market Analyst

The US dollar posted its strongest 2-day rally in six weeks following the US CPI report, although fading momentum across several FX majors suggests the rebound may soon pause. Still, historically bullish May seasonality for the DXY keeps the prospect of another push towards 99 alive.

The 0.6% rise in the US dollar index over the past two days marks its best 2-day streak in six weeks. But the rally could have been stronger, given around half of Wednesday’s gains were handed back before the US close. And with USD/JPY and USD/CAD stalling near resistance while EUR/USD holds above support, there is a technical case that the US dollar rebound may need to pause for breath — or pull back slightly over the near term.

 

View related analysis:

• US Dollar Outlook: Bullish May Seasonality Meets Volatility Risk
• Japanese Yen Outlook: USD/JPY Eyes 158 Pivot, AUD/JPY and GBP/JPY in Focus
• VIX Breakout Flashes Warning Signal for Wall Street
• US Dollar Coiling, USD/JPY Eyes Resistance Heading into US CPI
• ASX 200 Outlook: ASX 200 Seeks Bounce Despite Rising Bearish Open Interest

 

DXY Rally Loses Momentum, Though May Seasonality Remains Bullish

US Dollar Index (DXY) Technical Analysis

The daily chart shows Tuesday’s US CPI report resulted in a decent bullish range expansion candle. That aligned well with my bias earlier in the week, as I had noted the coiling nature of price action near cycle lows above support. However, Wednesday’s inverted hammer points to a loss of momentum from US dollar bulls around 98.50.

With the daily RSI (2) now overbought, traders should be on guard for at least a minor pullback. A prominent shooting star candle has formed on the 4-hour chart around the monthly pivot point, while bearish divergence has emerged on the RSI (2) on the same timeframe.

The best chance of the US dollar rolling over would likely come from headlines suggesting the US and Iran have reached a peace deal. That could weaken momentum sufficiently for traders to reconsider a break beneath the 97.35–97.50 support zone.

For now, the bias is for a minor pullback before another attempt higher towards 99, although my preference is for that level to hold as resistance.

https://preview.redd.it/s9tvyxb8xz0h1.png?width=1454&format=png&auto=webp&s=ae057b7f5883b213b27c3f0ce6fb3beac49d618f

Source: ICE, TradingView

Click the website link below to Check Out Our FREE "How to Trade GBP/USD" Guide

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https://preview.redd.it/wyg97lfbxz0h1.png?width=1420&format=png&auto=webp&s=f47df90c36d756727f92f6bbb91d8a72da1730bd

DXY Seasonal Trends Favour Further Gains in May

Now seems as good a time as any to remind ourselves that May tends to generate positive returns for the US dollar index. Over the past 26 years, the DXY has posted average and median returns of around 0.5%, closed higher 56% of the time, and, during those bullish months, averaged a gain of 2.5%.

Moreover, May has historically been the most bullish month of the year, with an average high-to-low range just shy of 4%.

Should seasonality play out once again, a 2.5% rally from May’s low would place the index just beneath 100. I cannot say I am that bullish on the US dollar, but it may mean a move back towards 99 is more likely than some expect.

https://preview.redd.it/lbxqn6xcxz0h1.png?width=1347&format=png&auto=webp&s=3b137f232ddbcb2e909ff8a49936d1246f36435a

Source: ICE, LSEG

 

 

FX Majors Hint at Near-Term US Dollar Pullback

FX majors are showing mixed signals following the US CPI-fuelled rebound in the dollar. While some USD pairs remain supported, several key technical levels suggest the rally may be losing momentum over the near term.

EUR/USD:

Support emerged around 1.17 on Wednesday, and with the euro accounting for 57% of the US dollar index, even a modest rebound here could send the dollar slightly lower over the near term. That said, EUR/USD has broken below a rising channel, which paints a more bearish picture further out — to the potential benefit of the US dollar.

GBP/USD:

Bearish momentum has seen the British pound break down from a rising wedge, which for now points towards a retest of the cycle lows around 1.1350. However, Wednesday’s smaller range and lower wick warn that bearish momentum may be fading over the near term.

Click the website link below to Check Out Our FREE "How to Trade EUR/USD" Guide

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https://preview.redd.it/fpibltxfxz0h1.png?width=1420&format=png&auto=webp&s=627baaf059576e343a2677e2be90fd0fa5891aab

USD/JPY:

A third consecutive day higher, though traders are clearly wary of the 158 level given Japan’s Ministry of Finance likely intervened around these levels last week. That makes it a suitable area for at least a minor retracement.

USD/CHF:

The Swiss franc continues to track the US dollar index closely, so the shooting star candle formed on Wednesday fits with my bias for a minor pullback in the US dollar.

USD/CAD:

A 2-bar bullish reversal week suggests further gains may await. However, the upper wick near resistance on Tuesday and Wednesday’s small inside day show this FX major is also hesitant to extend gains over the near term.

AUD/USD:

Choppy price action on the daily timeframe alongside converging highs and lows shows a classic rising wedge pattern near cycle highs. Perhaps an unpopular view given the Australian dollar’s strength elsewhere, but it remains a bearish reversal pattern while the Aussie struggles to break above 0.7730.

NZD/USD:

The New Zealand dollar appears best placed to take advantage of a weaker US dollar, with NZD/USD holding above prior highs and the 0.59 handle.

https://preview.redd.it/gm2xdy8hxz0h1.png?width=1460&format=png&auto=webp&s=9a1ef0f71fdce4a6d0cd8392da961b6c75ee1a17

Source: ICE, TradingView

 

 

View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

https://www.forex.com/en-us/news-and-analysis/us-dollar-rebound-falters-but-may-seasonality-remains-supportive/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The pound continues to trade remarkably well given the political backdrop in Britain, underscoring how reluctant markets remain to re-embrace the USD.

By :  David Scutt,  Market Analyst

• Starmer revolt deepens as more than 100 Labour MPs call for departure
• Sterling shrugs off UK political turmoil and surging gilt yields
• Hot US CPI still fails to generate sustained USD demand
• GBP/USD wedge structure warns sterling rally may be tiring

Summary

While UK political instability and rising gilt yields would ordinarily be expected to weigh on sterling, recent price action suggests broader USD sentiment and swings in global risk appetite remain the dominant drivers for now. That leaves the pound in the unusual position where deteriorating domestic political fundamentals are being offset by a market still reluctant to embrace the dollar even with higher crude prices and a more geopolitically tense backdrop.

Starmer turmoil meets fading dollar demand

Political turmoil following disastrous local government election results for the ruling Labour Party has intensified in Britain, with more than 100 Labour MPs now publicly calling for Prime Minister Keir Starmer to resign or outline a timetable for departure. While no formal leadership challenge has emerged yet, the scale of the revolt has raised concerns about another period of political and fiscal uncertainty at a time when UK borrowing costs are already elevated.

If Starmer survives with Rachel Reeves retaining her position as Exchequer, gilt yields may stabilise on expectations relative fiscal discipline broadly remains intact. But if he falls and Labour shifts towards a more progressive or left-leaning leadership direction, markets may demand an even larger fiscal risk premium.

https://preview.redd.it/yb1rqi60ps0h1.png?width=1000&format=png&auto=webp&s=18e99354158a3905b06411089ead985c9172c592

Source: Tradingview

But perhaps the bigger story is what this says about USD sentiment. From an outsider’s perspective, seeing sterling continue to grind higher despite intensifying political turmoil in Britain and long-end gilt yields ripping higher really demonstrates just how out of favour the dollar remains with traders right now. Under more normal circumstances, that type of backdrop would likely be weighing heavily on the pound.

Rising energy costs cloud Fed outlook

Not even a hot US inflation report for April was enough to turn the dial meaningfully for the USD on Tuesday, with headline CPI rising 0.6% in April, matching consensus, while the annual rate accelerated to 3.8% from 3.3%. Core CPI overshot, lifting 0.4% on the month against expectations for 0.3%, pushing the annual pace to 2.8% from 2.6%.

Perhaps more concerning for the Fed, core services inflation excluding housing jumped 0.47% on the month, a pace that suggests the central bank’s ability to simply look through the initial inflationary impulse from higher energy prices may not last long if broader second-round effects begin emerging through the services sector.

https://preview.redd.it/eq17q8k1ps0h1.png?width=999&format=png&auto=webp&s=dda73c28f8a3f07f5a13fc778d086f12a21d68ac

Source: TradingView

Futures traders are now pricing around eight basis points of Fed hikes this year, up from effectively zero at the start of the week. But that shift has reflected forward-looking concerns tied to higher crude prices just as much as the inflation report itself, with only around two basis points of the roughly nine basis point rise in US two-year Treasury yields on Tuesday coming after the CPI release.

Soft USD sentiment remains dominant

While the USD did manage to catch a bid on Tuesday, coinciding with another push higher in crude prices after Donald Trump labelled Iran’s latest peace proposal “garbage” and “totally unacceptable”, reducing hopes for any near-term reopening of the Strait of Hormuz, broader directional risks for sterling over the past week and month have continued to be dictated far more by swings in risk sentiment than crude prices or rate differentials.

That could well flip should the current regime shift, but for now it suggests upcoming US data, including upstream producer price data on Wednesday and retail sales on Thursday, may continue to play a secondary role in the pound’s performance. More likely sources of volatility may instead come from political developments in the UK and geopolitical headlines out of Beijing as Xi Jinping and Trump prepare to meet on Thursday morning in Asia.

Rising wedge warns of downside risks

https://preview.redd.it/ufzslfq2ps0h1.png?width=1001&format=png&auto=webp&s=4bae211a348a7e3124b835515f6e0314ba9c1c00

Source: TradingView

While sterling had been grinding higher over recent weeks, the rising wedge structure the price has been coiling within warns of the potential for an eventual downside break. We saw the price kiss the lower boundary of the wedge on Tuesday before bouncing alongside a recovery in riskier asset classes, reinforcing that it’s the immediate level to watch on the downside over the second half of the week.

If we were to see a clean breach of support, convention suggests we may eventually see a return towards where the structure formed near 1.3381, putting emphasis on the 100, 50 and 200-day moving averages, along with minor support at 1.3450, layered in between. Levels beyond to watch include 1.3348, with a break there opening up a dearth of visible technical levels until 1.3180.

Of course, with the price still coiling within the structure, there are other setups worth contemplating depending on how the price action evolves. If we were to see another retest of the lower boundary followed by a bounce, longs could be established with a tight stop below, targeting the top of the wedge found around 1.3660 today. Should the price instead test the upper boundary and fail, shorts could be established with a stop above, initially targeting the lower boundary.

After a lengthy period favouring long setups over shorts, the message from RSI (14) and MACD suggests momentum may be in the early stages of shifting. RSI has broken its lengthy uptrend and drifted back towards the neutral 50 level while MACD has crossed below the signal line despite remaining in positive territory. Overall, the oscillators favour a neutral bias which, as the range of setups outlined above suggests, means emphasis should remain firmly on the price action when assessing the merits of potential trades

https://www.forex.com/en-us/news-and-analysis/gbp-usd-forecast-sterling-defies-uk-political-chaos-as-usd-flounders/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

DXY technical weakness, collapsing USD-energy correlations and strong equity market relationships are combining to create a potentially powerful bullish setup for AUD/USD.

By :  David Scutt,  Market Analyst

• DXY losing haven appeal despite ongoing Iran tensions
• AUD/USD increasingly driven by risk appetite
• Australian Budget and US CPI may struggle to move the Aussie
• Break above 0.7283 could accelerate upside momentum

Geopolitics no longer supporting US dollar

AUD/USD may be on the verge of a bullish breakout as the US dollar loses one of the key pillars that supported it during periods of geopolitical stress over recent months.

Even with tensions in the Middle East escalating again with oil prices surging, the greenback has struggled to generate meaningful upside traction, instead sinking back towards levels that leave the dollar index threatening a fresh bearish breakout. Reinforcing the shift, the rolling 20-day correlation coefficient between DXY and Brent crude, shown in the bottom pane below, has deteriorated sharply from the high 0.9s for much of March and April to now sit at just 0.39, suggesting the dollar is no longer behaving like the energy security proxy it once was.

https://preview.redd.it/3u8jzvdhkl0h1.png?width=1001&format=png&auto=webp&s=8ca62456cf3f922ec6904fb692321d284de694bd

Source: TradingView

From a technical perspective, the DXY finds itself in a clear downtrend from the highs set in late March, more recently coiling within a descending triangle that first formed in mid-April. With the index trading beneath key medium and longer-term moving averages, along with RSI (14) and MACD suggesting downside momentum is rebuilding, the bearish structure leaves traders on alert for a potential breakdown through 97.65, putting levels such as 97.34 and 96.50 in play initially.

AUD/USD correlations send a clear message

Importantly for AUD/USD, the regime shift is taking place at a time where the Aussie is no longer trading as a yield differential play, instead behaving more like a leveraged expression of broad risk appetite and US dollar direction.

The relationship has become remarkably strong over the past month, strengthening even further over the past week. As the correlation matrix below reveals, AUD/USD’s inverse relationship with the DXY has pushed to extreme levels across multiple time horizons, reinforcing the view that broad US dollar direction is now the dominant force driving the pair.

https://preview.redd.it/0nubo6xikl0h1.png?width=1000&format=png&auto=webp&s=41bdcb17ce281503e373c292ad9075577e108fcb

Source: TradingView

At the same time, the Aussie’s strongest positive relationships are increasingly tied to broader risk appetite, reflected through its close alignment with US and global equities along with implied Treasury market volatility. The relationship with both US and global equities has surged to 0.96 over the past week, building on already strong positive readings across longer timeframes.

With risk appetite now the dominant force driving the Aussie, unless you see a looming rout in technology stocks which have been the key force behind the rally in equity markets, it suggests AUD/USD is likely to remain supported.

Why Australia’s Budget and US CPI may matter less

https://preview.redd.it/bskjye8kkl0h1.png?width=1147&format=png&auto=webp&s=013540165faa0167d648a3fa5e351e8bf0625b20

Source: TradingView (US EDT shown)

That potentially leaves upcoming Australian data and the federal Budget later today as little more than cannon fodder for headline writers rather than genuine market-moving events. Australian budgets rarely influence markets in a sustained manner, and while flagged tax reforms may impact Australian government bonds on this occasion given it’s relatively rare to see major changes announced, the lack of relationship between AUD/USD and yield differentials casts doubt on whether it will matter much for the currency.

The same argument can largely be applied to US CPI data for April later today. With stable labour market conditions and sluggish wages growth allowing the Federal Reserve to look through any near-term energy-driven inflation impulse given it reflects cost-push rather than demand-driven forces, it raises serious question marks on whether the report will meaningfully shift the dial for the US rate outlook, and with it the dollar.

Trump and Xi may hold the key to sentiment

Instead, markets may have their eyes fixed on other factors likely to influence sentiment, and not necessarily the Iran war. Chief amongst them is Donald Trump’s meeting with Xi Jinping in China on Wednesday.

They would not be meeting unless they had wins to show their citizens, making it an event that may help underpin risk appetite at a time where sentiment appears to be the dominant force driving AUD/USD.

Even though the relationship is not as strong as it once was, for a currency that has been used as a China proxy trade for lengthy periods in the past, any improvement in sentiment surrounding US-China relations conceivably bodes well for the Aussie.

Technical setup favours further Aussie gains

https://preview.redd.it/2aht8fnlkl0h1.png?width=1001&format=png&auto=webp&s=10d14df2bc79f72e5d941526ded6e57c3add825a

Source: TradingView

There’s not much to dislike about AUD/USD right now from a technical perspective for bulls. The price remains in the uptrend from the lows struck in late March, marking what for now looks like the nadir in sentiment surrounding the Iran war and its impact on the global economy and earnings. That uptrend has now been tested on several occasions and held every time, including last Tuesday when the RBA delivered what was arguably a less hawkish rate hike than markets had priced in beforehand.

Since then, the price has continued to grind higher, culminating in a bullish engulfing candle last Friday before a fresh closing high was printed on Monday.

Overhead, the June 2022 swing high at 0.7283 is the key level to watch, with a break above opening the door for a run towards 0.7460, a level that previously acted as both support and resistance during the prior bearish trend from the highs struck in the early stages of the COVID pandemic.

Momentum indicators are also turning higher, adding to the sense that a bullish breakout may not be far away. Bearish divergence between RSI (14) and the price that was previously warning on reversal risk has been replaced by renewed upside strength, leaving the signal favouring further gains, especially as it’s not yet overbought. MACD has also confirmed the move, reaccelerating away from the signal line while holding in positive territory.

Should AUD/USD be unable to break above 0.7283 and instead slip below the March uptrend, it would open the door for fresh short setups to be considered, allowing positions to be established beneath the uptrend with either the trendline or 0.7283 used for protection. On the downside, 0.7200 would be the initial target, with a deeper pullback towards 0.7100 possible beyond that.

https://www.forex.com/en-us/news-and-analysis/aud-usd-forecast-risk-appetite-and-dollar-weakness-align-for-breakout/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The US dollar is coiling above support ahead of US CPI, while USD/JPY tests a key resistance zone near 158 following suspected MOF intervention.

By :  Matt Simpson,  Market Analyst

The US dollar is holding within a tight range ahead of today’s US CPI report, as traders assess whether elevated oil prices linked to the Iran conflict continue to fuel inflationary pressures. While the broader bearish USD thesis remains intact for now, USD/JPY is rebounding towards key resistance near 158 following suspected intervention from Japan’s Ministry of Finance.

 

View related analysis:

• FX Futures Positioning: USD Index, USD/JPY, USD/CAD | COT Report/
• AUD/USD Outlook: Aussie Buoyant Ahead of Trump-Xi Summit/
• AUD/USD, NZD/USD Extend Gains, Though AUD/NZD Flashes Reversal Risk
• USD/JPY Plunges from 158 as Yen Surges on Another Suspected Intervention

 

US Dollar and USD/JPY Setups in Focus Ahead of US CPI

US CPI Report Could Dictate Near-Term Direction for the US Dollar

The US dollar is trading within a narrow range heading into today’s US CPI report, which is attracting plenty of attention as traders assess how much the conflict in Iran — and the resulting surge in oil prices — continue to influence inflationary pressures.

With the latest peace proposal rejected, there is no immediate end in sight for elevated crude oil prices. And that suggests inflationary pressures are also likely to remain elevated. While most agree that the worst of the conflict is behind us, markets appear to have largely priced in the roughly 20% supply shock.

US core CPI is expected to rise to 0.3% from 0.2%, while headline CPI is forecast to increase by 0.6% following the 0.9% spike the month prior. That could lift annual headline inflation to 3.7% y/y. The US dollar’s direction is likely to hinge on which side of expectations CPI lands. A hotter-than-expected print could hand USD bulls a near-term boost — although, as I explain below, such rallies may ultimately be viewed favourably by bears looking to fade strength. A softer set of CPI figures could instead allow bears to regain control sooner and push the dollar beneath last week’s lows.

https://preview.redd.it/f9piy5n3al0h1.png?width=903&format=png&auto=webp&s=6c044d3cadcc6fc0ad24380b247e1a335512dbc3

Source: BLS, Forex Factory, LSEG

 

 

US Dollar Index (DXY) Technical Analysis

Bearish US Dollar Thesis Still Intact for Now

I continue to work with the assumption that a meaningful top was printed on the US dollar on March 31 at 100.50, marking the end of an ABC countertrend move against the sharp decline from 108.26 in January 2025. If that view proves correct, it would also imply an eventual break beneath the 95 lows later in the year.

High oil prices stemming from Iran’s closure of the Strait of Hormuz are clearly a bump in the road for now. However, the fact the US dollar is still being allowed to weaken as traders scale back concerns over further Fed hikes is an encouraging sign for the broader bearish USD thesis.

But we also need to be on guard for upside inflation surprises, which could prove supportive for the US dollar over the near term.

Click the website link below to Check Out Our FREE "How to Trade USD/JPY" Guide

https://www.forex.com/en-us/whitepapers/

https://preview.redd.it/6rlda24hal0h1.png?width=1420&format=png&auto=webp&s=629866914dd6e1c91905ee01854c60bce509745b

US Dollar Index Coils Above Support Ahead of US CPI

The daily chart shows the US dollar index has found support just above the 97.37 high-volume node (HVN), with a double bottom forming around 97.50. The lower wicks around that level also highlight underlying demand.

With prices coiling above last week’s lows heading into today’s US CPI report, I have the technical hunch that the US dollar could be due for a pop higher, given it has established a base above last week’s demand zone. That could see the US dollar index retest the 50-day and 200-day EMA near 98.40, alongside the monthly pivot point, over the near term. It would also make for a logical area where bears may reconsider shorts.

Naturally, I’d expect the USD to roll over if CPI comes in refreshingly soft, in which case the 97.37–97.50 support zone could become the next target for bears. A break beneath that area opens the door for a move towards the 96.15 HVN and February low at 96.12. These same bearish targets also apply should a swing high form up to or around the 98.40 resistance cluster mentioned above.

https://preview.redd.it/7nhvedoial0h1.png?width=1454&format=png&auto=webp&s=fe74f64a0c6652acc3b4fc002e03c3f47ac612a1

Source: ICE, TradingView

 

 

USD/JPY Technical Analysis: US Dollar vs Japanese Yen

I outlined in my previous two Japanese yen articles that currency intervention from thew MOF tends to coincide with meaningful tops on USD/JPY – spanning weeks to months. Given my bearish USD predisposition, I’m happy to assume USD/JPY saw a significant top on April 30. The -5.1% (152.52) and -7.8% (148.19) labels on the weekly chart represent post-intervention declines of the two smaller selloffs on USD/JPY.

Yet momentum is curling higher with Monday’s bullish engulfing candle, which could temp bulls to drive it back towards the 158 handle. Though note that monthly pivot point (157.62) and 157.54 swing lows nearby to which could provide a resistance zone for bears to fade into.

And should a swing high form at or around 158 as I anticipated, bears could then seek to drive USD/JPY back towards the 200-day EMA and below.

https://preview.redd.it/sz171ipdcl0h1.png?width=1454&format=png&auto=webp&s=2deb396d8560dcf4f22b5d7753a231f90862cb38

Source: ICE, TradingView

 

View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

https://www.forex.com/en-us/news-and-analysis/us-dollar-coiling-usd-jpy-eyes-resistance-heading-into-us-cpi/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

USD positioning shifts as yen shorts unwind and CAD bets turn. What COT data reveals for DXY, USD/JPY and USD/CAD outlooks.

By :  Matt Simpson,  Market Analyst

FX futures positioning reveals a shifting landscape for the US dollar, yen and Canadian dollar, with notable changes across large speculators and asset managers. The latest COT report highlights falling USD exposure, a sharp unwind of yen shorts following suspected intervention, and a potential turning point for CAD positioning.

While the US dollar index remains under pressure, positioning suggests downside may be limited. At the same time, traders are reassessing bullish bets on USD/CAD and reducing bearish exposure to the yen, offering fresh clues for near-term FX direction.

 

View related analysis:

• FX Futures Positioning: USD, USD/JPY, GBP/USD, AUD/USD | COT Report
• AUD/USD, NZD/USD Extend Gains, Though AUD/NZD Flashes Reversal Risk
• USD/JPY Plunges from 158 as Yen Surges on Another Suspected Intervention
• US Dollar Outlook: Bullish May Seasonality Meets Volatility Risk

 

 

COT Report Analysis: USD Index, USD/JPY and USD/CAD Futures Positioning

Large Speculator Positioning from the COT report

https://preview.redd.it/oyhddv7i7g0h1.png?width=878&format=png&auto=webp&s=ce8b67c502f2bea83717f87694021a9250b75759

Source: CFTC (COT), CME, ICE, LSEG

 

• US Dollar: Aggregate futures exposure fell by $4.7 billion last week to $6.2 billion.
• EUR/USD: Net-long euro positions dropped by 9k contracts among large speculators and asset managers, driven by increased shorting.
• GBP/USD: Net shorts rose by 12k contracts across both groups, as shorts increased and longs were trimmed.
• USD/JPY: Suspected MoF intervention prompted traders to cut net-short yen exposure by 56.3k contracts.
• USD/CHF: Gross longs on the Swiss franc climbed 12.7k contracts, while shorts remained broadly unchanged.
• USD/CAD: Stronger demand for longs reduced net-exposure to Canadian dollar futures by 37.6k contracts.
• AUD/USD: Large speculators lifted net longs by 6.8k contracts, nearing a 13-year high.
• NZD/USD: Asset managers nudged net shorts to a 15-week high, rising by 1.5k contracts.

 

Asset Manager Positioning | COT Report

https://preview.redd.it/jctktwzj7g0h1.png?width=891&format=png&auto=webp&s=290ce0e15d599e15bc02843b3433f5be4a5d4452

Source: CFTC (COT), CME, ICE, LSEG

Click the website link below to Check Out Our FREE "How to Trade EUR/USD" Guide

https://www.forex.com/en-us/whitepapers/

https://preview.redd.it/mebu9w8n7g0h1.png?width=1420&format=png&auto=webp&s=09cf6280592c67d57025b21388efa48bb41a9863

FX Futures Positioning | COT Report (IMM Data)

US Dollar Index (DXY) Futures Positioning | COT Report

The US dollar is down around -3% from its late March high, with the market repeatedly failing to hold materially above 100 since November. It has closed lower in five of the past six weeks, although bearish momentum appears to be waning. With the US and Iran no closer to a deal, USD downside potential may be limited while upside pressures begin to build.

Aggregate exposure to the USD via futures fell by $4.7 billion to $6.2 billion last week. However, it remains elevated relative to its February trough and not far below its April high. From that perspective, the US dollar index could appear oversold relative to aggregate positioning.

Moreover, net-long exposure among asset managers rose by 2.6k contracts to 10.8k contracts, and they have remained net-long since early March. Given this group tends to be several steps ahead of large speculators, I am inclined to overlook the fact that the latter were close to flipping to net-short exposure last week.

https://preview.redd.it/b68opulo7g0h1.png?width=1566&format=png&auto=webp&s=e180dd23411d80b3dc269a1a732a6aa7c525ebdb

Source: ICE, CFTC (COT), LSEG

 

 

USD/JPY Futures Positioning | COT Report

The surge of bearish volatility on the Japanese yen stemming from suspected MOF intervention shook bearish bets out of their positions. Large speculators culled -37.8k gross-shorts – their fastest weekly drop since August 2024. The fact that longs only rose by 2.5k shows an air of caution on volatile times. Asset managers reduced their gross-short exposure by -13.3k contracts – their fastest weekly pace since December 2024. Again, longs were only up slightly by 2.6k contracts.

I noted in my intervention-analysis reports that previous rounds from the MOF have generally coincided with multi-month tops on USD/JPY and double-digit declined in percentage terms. That keeps USD/JPY in my ‘fade into rallies’ watchlist for now.

https://preview.redd.it/7nhz3fzp7g0h1.png?width=1576&format=png&auto=webp&s=2ebf44f69c13586c090396fcd69c89c1e35570be

Source: CME, CFTC (COT), LSEG

Click the website link below to Check Out Our FREE "How to Trade USD/JPY" Guide

https://www.forex.com/en-us/whitepapers/

https://preview.redd.it/4m3oh79u7g0h1.png?width=1420&format=png&auto=webp&s=6742a5c573807d522f0caedf217ab4b7621d4ac3

USD/CAD Futures Positioning | COT Report

A 23.8k reduction in net-short exposure among large speculators marked the fastest weekly shift in 14 weeks, leaving net shorts at just -14.7k contracts. However, weak Canadian employment data on Friday and broader CAD weakness suggest this may have been a poorly timed move by speculators.

Moreover, asset managers may also be questioning their decision to increase net-long exposure by 13.8k contracts, lifting positions to a six-week high of 20.8k contracts.

With USD/CAD snapping a four-week losing streak and Canadian dollar futures hinting at a potential swing high on the weekly chart, we could see a reversal of bullish bets in the week ahead.

CFTC COT report chart showing USD/CAD futures positioning, with falling net shorts among large speculators and rising asset manager longs as prices hint at a potential reversal

https://preview.redd.it/fryzy1rv7g0h1.png?width=1456&format=png&auto=webp&s=52d3a26232533fff41a967635365e58b4707a145

Source: CME, CFTC (COT), LSEG

 

 

View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

https://www.forex.com/en-us/news-and-analysis/fx-futures-positioning-usd-index-usd-jpy-usd-cad-cot-report-2026-05-11/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

AUD/USD enters the week near three-year highs as traders eye the Trump-Xi summit, US inflation data and ongoing risk appetite trends.

By :  Matt Simpson,  Market Analyst

AUD/USD enters the new week near three-year highs, supported by broad risk appetite, bullish futures positioning and hopes tensions between the US and China may continue to thaw. While Australian economic data is unlikely to be a major volatility driver, traders will closely monitor US inflation reports, the Trump-Xi summit in Beijing and geopolitical risks surrounding Iran and the Strait of Hormuz. With institutional positioning remaining bullish and technical support holding above 0.71, dips in AUD/USD may continue to attract buyers.

 

View related analysis:

• ASX 200 Outlook: Bears To Retain Control Despite Two-Day Rebound
• AUD/USD, NZD/USD Extend Gains, Though AUD/NZD Flashes Reversal Risk
• USD/JPY Plunges from 158 as Yen Surges on Another Suspected Intervention
• AUD/USD Outlook: RBA Hike Priced In as Yields Ease, Momentum Fades

 

AUD/USD Buoyant as Traders Eye Trump-Xi Summit and US Inflation Data

Australia This Week: Economic Data and Events for AUD/USD Traders

https://preview.redd.it/16xignihzd0h1.png?width=820&format=png&auto=webp&s=01b1de3aac92005e2efcddfd97cb3aec086a4e1d

AUD/USD Traders Look Offshore for Volatility Drivers

This is not likely to be a big week for AUD/USD traders seeking volatility where domestic data is concerned, though there are plenty of ‘nice to knows’ for those keeping tabs on the economy. We’ll get a fresh update on how consumers and businesses feel about the RBA’s latest rate hike via Westpac and NAB reports on Tuesday. And the wage price index is rarely much of a market mover.

Forex traders will then need to rely on US data, or appetite for risk stemming from the Middle East. Iran rejected the latest peace proposal from the US which knocked sentiment lower on Thursday, and it continues to look likely the Strait of Hormuz will remain closed and keep crude oil prices and inflation expectations elevated.

 

Sticky US Inflation Yet Softer Crude Oil Keeps AUD/USD Supported

US inflation is likely to heat up further, meaning it would be more of a surprise for traders if it doesn’t. Yet the US dollar remains on the back foot as oil prices seem to have priced in the worst of the war, which seems to be heading towards a dragged out but not-quite-nuclear event after all. That is helping to lift sentiment and keep odds of Fed rate hikes in check, and support AUD/USD on appetite for risk alongside a hawkish RBA.

Click the website link below to Check Out Our FREE "How to Trade AUD/USD" Guide

https://www.forex.com/en-us/whitepapers/

https://preview.redd.it/rrxnabolzd0h1.png?width=1420&format=png&auto=webp&s=2cb90fed455118a595ff7f1792c1f289527b970a

Trump-Xi Summit Could Provide Fresh Tailwind for Risk Assets

A high-stakes meeting between Trump and Xi Jinping in Beijing also takes place on Thursday and Friday. While no major breakthrough is expected, the fact the summit is happening at all suggests tensions may be thawing, and traders will keep an ear out for any positive headlines regarding trade, tariffs or technology restrictions. If anything, I suspect the summit could pave the way for another leg higher in risk appetite, which could support AUD/USD alongside Wall Street and weigh on the US dollar.

Of course, should talks stall or old wounds be reopened, sentiment could easily sour and drag the Australian dollar lower.

 

Australian Dollar Performance

It was an overall bullish week for AUD traders, although the Australian dollar lagged behind the New Zealand dollar and Chinese yuan. It was also flat against the euro and lost momentum against the British pound.

• AUD/USD closed comfortably above 0.72, marking its highest weekly close in three years.
• AUD/CAD printed its first weekly close above 0.99 since March 2018, helped by a weak Canadian employment report on Friday.
• AUD/CHF closed higher for a sixth consecutive week and has also been bullish for five straight months, although Wednesday’s lower high suggests bullish momentum may be waning.
• AUD/EUR rose for a sixth consecutive week, although the weekly doji beneath the March high suggests its winning streak may at least be due for a pause.
• AUD/GBP edged higher but also formed a small doji beneath the recent cycle high, warning of fading bullish momentum.
• AUD/JPY printed a small bullish inside week alongside a doji (indecision candle), suggesting the market’s preferred barometer for risk is not yet ready to roll over despite strong suspicions of FX intervention from Japan’s MOF.
• AUD/NZD formed a 2-bar bearish reversal on the weekly chart around 1.22, adding weight the my case for a pullback towards 1.20 as part of a rising wedge / ending diagonal pattern

https://preview.redd.it/pxivmo1nzd0h1.png?width=859&format=png&auto=webp&s=35f9ed5024c8d4708e37fcde679ee350ab64980e

Chart prepared by Matt Simpson - Source: LSEG

 

AUD/USD Technical Analysis: Australian Dollar vs US Dollar

AUD/USD Correlations

• Familiar relationships continue to hold true, with the inverted correlation between the US dollar and Australian dollar remaining strong and above -0.9 across the 10, 20 and 60-day lookback periods.
• The Chinese yuan (CNY) shares a strong positive correlation with AUD/USD across all three timeframes.
• Extending the China theme, copper’s correlation has risen to 0.94 over the past two weeks.
• That is also seeing its commodity FX counterpart, NZD/USD, correlate tightly with the Aussie.
• Appetite for risk on Wall Street is also keeping the S&P 500 correlation above 0.9 across all three timeframes.

https://preview.redd.it/8vk59dpozd0h1.png?width=1280&format=png&auto=webp&s=f6e9d9adae84e96973a3e86f4b694f6d48e8229d

Source: LSEG

Click the website link below to Check Out Our FREE "How to Trade EUR/USD" Guide

https://www.forex.com/en-us/whitepapers/

https://preview.redd.it/37h6xivqzd0h1.png?width=1420&format=png&auto=webp&s=0eaba049fbe9b3a9d9c92a6b6d307a811d4ede8c

AUD/USD Futures Positioning | COT Report

The weekly change of exposure was minimum overall among futures traders, though it continues to show a market of bullish defiance despite some metrics suggesting a sentiment extreme.

• Large speculators increased net-exposure to AUD/USD futures by 6.8k contracts, just 2.6k contracts short of a 13-year high
• Most of this came from fresh longs, though shorts were also trimmed by -500 contracts
• Asset managers gross-long exposure was also nudged to a fresh record high, up 1.5k contracts on the week

https://preview.redd.it/3vgd91yrzd0h1.png?width=1236&format=png&auto=webp&s=1dff9bf7bc6edd993b29344a77c07ab37d16d151

Source: CFTC (COT) CME, LSEG

 

AUD/USD Outlook: Risk Reversals and HVN Support Point to Further Upside

With my hunch that US-China talks will prove fruitful and the Aussie remaining within a solid uptrend overall, dips remain preferable — even if price action is becoming choppier on the AUD/USD daily chart.

Note that risk reversals are also trending higher alongside prices, suggesting institutions are backing the trend while expectations of downside tail risk continue to diminish.

Prices are bouncing along the 10-day EMA, and should price break below it, buyers may step in around the 20-day EMA. The daily trend remains bullish above 0.71, with a high-volume node (HVN) at 0.7158 sitting near the 20-day EMA as a potential support zone. A break above the May high (0.7282), or ideally 0.7300, could set the stage for a move towards my 0.7400 target.

https://preview.redd.it/ggsxuz9tzd0h1.png?width=1092&format=png&auto=webp&s=a6691c3803177d83ab53551d6a3a9679cb5cfdf0

Source: CME, LSEG

 

 

View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

https://www.forex.com/en-us/news-and-analysis/aud-usd-outlook-aussie-buoyant-ahead-of-trump-xi-summit/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

USD/JPY tests intervention risk near 158 while GBP/USD momentum fades ahead of NFP, with technical setups pointing to potential downside moves.

By :  Matt Simpson,  Market Analyst

FX markets are trading in typically subdued fashion ahead of Nonfarm Payrolls, although implied volatility suggests traders still expect sizeable moves once the data hits. USD/JPY remains sensitive to further intervention fears near 158, while GBP/USD is showing signs its multi-week rally is losing momentum. Here are the key technical setups to watch into NFP.

 

View related analysis:

• AUD/USD, NZD/USD Extend Gains, Though AUD/NZD Flashes Reversal Risk
• USD/JPY Plunges from 158 as Yen Surges on Another Suspected Intervention
• FX Futures Positioning: USD, USD/JPY, GBP/USD, AUD/USD | COT Report
• US Dollar Outlook: Bullish May Seasonality Meets Volatility Risk

 

USD/JPY and GBP/USD Price Action Setups Ahead of NFP

FX Volatility Muted Ahead of NFP, Though GBP/USD and USD/JPY Stand Out

We’re seeing the usual minuscule ranges across FX majors on NFP day, with little reason to expect sudden moves without a surprise catalyst. Looking across implied volatility levels for the FX majors shows traders expect the most action in the British pound and Japanese yen. The 1-day IV for GBP/USD sits at 76 pips, equivalent to 167% of its 20-day ATR. For USD/JPY, 1-day IV sits at 94 pips (up or down), or 159% of its 20-day ATR. Do note, however, that 1-day IV for all FX majors is currently above 100% relative to their ATR(20).

https://preview.redd.it/2vjcox4peuzg1.png?width=1031&format=png&auto=webp&s=00568e6d8ae5fc0e68494bd5c65b73d0ecf1dabe

Source: LSEG

 

USD/JPY Technical Analysis: US Dollar vs Japanese Yen

USD/JPY Drifts Higher After Intervention Shock, But Downside Risks Remain

Needless to say, there has been a decent amount of volatility on USD/JPY, most likely due to Japan’s Ministry of Finance (MOF) intervening in the yen at least twice since last Thursday. That has produced two notable selloff sessions, although prices are once again drifting higher during quieter trade.

Given the most recent suspected intervention occurred just below 158, that level could become self-fulfilling resistance as bulls err on the side of caution should prices move back towards it. I outlined my reasoning for a much deeper decline in prior yen articles, largely because previous interventions have coincided with multi-week or multi-month declines. Even a smaller post-intervention move of -5.1% could send USD/JPY down to 152.52, while a -7.8% decline would target 148.19. A move below 140 could even come into view if we see a repeat of some of the double-digit declines witnessed throughout history.

Click the website link below to Check Out Our FREE "How to Trade USD/JPY" Guide

https://www.forex.com/en-us/whitepapers/

https://preview.redd.it/qxv6gwscguzg1.png?width=1420&format=png&auto=webp&s=a0cd7504376f4633508e329a6608e942f89ee13c

USD/JPY Rebound Faces Heavy Resistance Around 158

The 1-hour chart shows prices drifting higher, but with so many technical levels around the 158 level – it seems a swing high up to or around that level could be likely. Between 157.50 – 15 we have the monthly and weekly pivot points, the upper 1-day IV, 50% retracement and prior support / resistance zone. So even if a strong NFP numbers are delivered, it could be a last hurrah before momentum turns and USD/JPY heads back towards the 200-day EMA around 155.

https://preview.redd.it/plan3p9eguzg1.png?width=1454&format=png&auto=webp&s=038aba69bff7ad26865d53d63893daaa60aac871

Source: ICE, TradingView

 

GBP/USD Technical Analysis: British Pound vs US Dollar

GBP/USD Rally Losing Momentum Beneath February VPOC

The British pound has staged a decent rally since the April low, with GBP/USD rising as much as 3.8% by last Friday’s high. However, much of that rally occurred over an eight-day period, and bullish momentum has clearly faded over the past three weeks.

The fact the rally stalled around the February VPOC and may have since formed a lower high also hints at a downside move for GBP/USD. Note the three large upper wicks across the past five candles, suggesting bulls continue to lose momentum beneath the VPOC, while Thursday’s bearish inside candle also warns of a potential dip lower.

A move towards the 50-day EMA (1.3470), monthly pivot point (1.3465), or the 1.3448 swing low could now be on the cards.

 

Click the website link below to Check Out Our FREE "How to Trade Gold" Guide

https://www.forex.com/en-us/whitepapers/

https://preview.redd.it/wppmhfchguzg1.png?width=1420&format=png&auto=webp&s=7d420ff6260b01ded402453bbeaf12093d8462b1

GBP/USD Risks Further Weakness as Bear Flag Emerges

The 1-hour chart shows momentum turning sharply lower on Thursday. A small retracement — possibly a bear flag — is now forming near the cycle lows. Were it not for NFP, I would be more inclined to expect a clean breakdown, although the risk of another drift higher remains apparent.

Note the high-volume node (HVN) at 1.3576, which could act as resistance. Otherwise, I would look for evidence of a swing high towards 1.3600 on the assumption of a move lower towards 1.3470, near the 38.2% Fibonacci retracement level and 50-day EMA.

https://preview.redd.it/jftp16siguzg1.png?width=1454&format=png&auto=webp&s=d0da317f5a945c7faf769b3c70cb3e78bc5bb486

Source: ICE TradingView

 

 

View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

https://www.forex.com/en-us/news-and-analysis/us-dollar-price-action-setups-into-nfp-usd-jpy-and-gbp-usd-in-focus/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

EUR/USD has tracked yields, equities and crude almost perfectly over the past week, yet the price still can’t convincingly break higher. EUR/JPY faces a similar battle with intervention fears looming overhead.

By :  David Scutt,  Market Analyst

• EUR/USD correlations with yields, equities and crude remain near extreme levels
• WSJ report on Gulf military access sparks sharp reversal in oil prices
• Payrolls consensus looks modest following the strong ADP print
• EUR/USD keeps printing topside rejection wicks above 1.1747
• Suspected Japanese intervention caps EUR/JPY upside at 184.80

Bulls hesitate despite supportive conditions

EUR/USD price action has looked increasingly unconvincing over the past week, repeatedly rejected on probes towards 1.1800 despite a macro backdrop that should, in theory, be supportive for gains against the dollar.

Lower crude prices, easing volatility, firmer equities and declining US yields have typically aligned with EUR/USD strength recently, yet the pair has struggled to capitalise.

That hesitation stands out even more when viewed against the incredibly tight grip crude oil continues to hold over broader asset classes. Over the past five days, EUR/USD has posted near perfect inverse correlations with US two-year yields at -0.99 and US 10-year yields at -0.97. The pair has also tracked S&P 500 futures closely at 0.95, global equities at 0.93 and Brent crude futures inversely at -0.87.

That grip was again on display overnight after the Wall Street Journal reported Saudi Arabia and Kuwait had lifted restrictions on the US military’s use of airspace and bases, potentially allowing Washington to restart escort operations through the Strait of Hormuz as early as this week. Crude prices rallied on the report before adding to gains on news of explosions near Bandar Abbas in Iran, reinforcing how sensitive markets remain to developments in the Gulf.

Payrolls risk looms for the dollar

The inability of EUR/USD to build upon the supportive backdrop may reflect caution ahead of US nonfarm payrolls later today where an increase of 62,000 is expected alongside an unchanged unemployment rate of 4.3%.

The payrolls forecast also looks skinny relative to other labour market indicators received this week, including ADP private payrolls which printed at 109,000 in April, the strongest increase since January 2025. ADP has also not had a bad recent track record leading the private payrolls component within the establishment survey, leaving open the possibility markets may be underestimating upside risks in the official release.

As ever, the direction and magnitude of the deviation from consensus is what markets tend to initially react to, with stronger payrolls generally supporting the dollar, and vice versa. If accompanied by complementary movement in the unemployment rate, which is what the Fed cares most about, the reaction in the greenback can often become far more meaningful.

A combination of a sizeable payrolls beat alongside a lower unemployment rate would likely boost the dollar, with the opposite if the results disappoint. While developments in the Gulf continue to dictate broader market direction for now, payrolls still carries the capacity to generate sizeable short-term volatility in this environment and should not be underestimated by traders.

EUR/USD struggles to sustain upside breaks

https://preview.redd.it/g638lom59tzg1.png?width=1001&format=png&auto=webp&s=c547fa8d0a2a88709042c860bf1d6df4d1a62cae

Source: TradingView

While the overall bias for EUR/USD has been higher over the past week, the price action has been anything but convincing for the bulls. It's been a slog rather than a gallop, with the string of long topside wicks above the 50% retracement of the February-March bear move delivering an increasingly bearish message even though we haven't seen a classical topping pattern emerge as yet.

Above 1.1747 up to 1.1800, bears are lining up to sell, casting doubt on how much longer bulls will be willing to defend the 200DMA given the repeated inability to break higher. That's the immediate range for traders to focus on as we head towards payrolls and the weekend.

Beneath the 200DMA, we also have the 38.2% Fibonacci retracement of the February-March move along with the 50DMA, creating a support zone that may deter bears from becoming overly aggressive without a meaningful catalyst, be it another escalation in the Gulf or a much stronger-than-expected payrolls report.

However, with little significant technical support evident beneath that zone, if it gives way, focus would shift towards a potential retest of the March lows with only the 23.6% retracement level and the 1.1500 handle of note in between.

Above the resistance zone from 1.1747 up to 1.1800, the levels to watch include 1.1850, which has already acted as both support and resistance this year, along with 1.1918, the swing high set in September last year.

While RSI (14) and MACD continue to marginally favour the bulls, both are flatlining near neutral levels, signalling momentum is not with either side right now. That places greater emphasis on the price action when assessing trade setups as they emerge.

EUR/JPY trapped between intervention and momentum

https://preview.redd.it/8sd49yr69tzg1.png?width=1001&format=png&auto=webp&s=5d065b72c012a295c9995f3d824174defbf8ab08

Source: TradingView

Whereas crude fluctuations resulting from Gulf headlines remain the dominant driver of EUR/USD movements, for EUR/JPY the largest force over the past week has been suspected intervention from the Bank of Japan on behalf of the Japanese government, using thin market conditions in the Asian session with Chinese and Japanese markets offline to sell into strength.

Of which there has been plenty.

One look at the daily chart tells the opposite story to EUR/USD, with a string of long downside wicks from support at 182.00 the obvious feature.

Overhead, the confluence of resistance near 184.80 with the 50DMA has been capping gains, providing traders with a clear range to work with today.

With four suspected rounds of intervention already under the belt, Japanese officials may be reluctant to continue fighting the broader bearish yen trend until macro conditions become more suitable, so don't for one second believe the BOJ will be asked to step in again should the price break and hold above 184.80.

If that does eventuate, 186.23 has acted as both support and resistance recently, making it the next level overhead to watch before the April swing high near 188 comes into view.

Beneath 182.00, 180.82 and the confluence of the 200DMA with 180.00 would be on the radar should we see a more sustained push lower.

Unless backed by fundamentals supportive of yen strength, further dips towards 182.00 that fail to be sustained would make for decent long entries, allowing for stops to be placed beneath the zone while targeting 184.80 initially.

https://www.forex.com/en-us/news-and-analysis/eur-usd-stalls-despite-tailwinds-as-intervention-fears-cap-eur-jpy-upside/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

AUD/USD and NZD/USD rally on peace deal hopes and a weaker US dollar, while AUD/NZD signals a potential bearish reversal from 13-year highs.

By :  Matt Simpson,  Market Analyst

Wall Street reached fresh highs, crude oil fell more than 7%, and the US dollar tracked lower during another risk-on session as traders bet the US and Iran are moving closer to a legitimate peace deal. That provided a tailwind for the Australian dollar and New Zealand dollar, both of which posted solid breakouts — with NZD/USD and AUD/USD leading the FX majors on the day.

View related analysis:

• USD/JPY Plunges from 158 as Yen Surges on Another Suspected Intervention
• Japanese Yen Weakens: USD/JPY Outlook as EUR/JPY and AUD/JPY Diverge
• AUD/USD Outlook: RBA Hike Priced In as Yields Ease, Momentum Fades
• Australian Dollar Outlook: AUD/USD Hits 0.72 Into RBA, Momentum Fades

 

This came despite fingers once again being pointed at Japan’s Ministry of Finance (MOF) over another suspected round of yen intervention during Wednesday’s Asian session. While the yen surged against all its peers, the moves were not up to the size of Thursday’s and most or all of the yen’s gains evaporated by the end of the US session.

While the Australian dollar has finally broken out and is reaching for 73c, it is being left behind by the New Zealand dollar — and that points to potential bearish reversal risk for AUD/NZD over the near term.

https://preview.redd.it/152jvjl2blzg1.png?width=705&format=png&auto=webp&s=809fce2fbc428093043ae65c0deb2b4141ae5d5f

Source: LSEG

 

Australian Dollar and New Zealand Dollar Rally as AUD/NZD Faces Reversal Risk

AUD/USD Breakout Hands Back Gains

I must admit that I am a little underwhelmed by the breakout on AUD/USD, though it does make sense give the RBA were not quite as hawkish as they could have been. While they left plenty of wriggle room for further tightening alongside their 25bp hike this week, their revised forecast simply put their OCR in line with market expectations prior to the meeting.

Click the website link below to Check Out Our FREE "How to Trade AUD/USD" Guide

https://www.forex.com/en-us/whitepapers/

https://preview.redd.it/05vy8vb6blzg1.png?width=1420&format=png&auto=webp&s=4ef00e5f6d058a488a49c97285e8a3dd66978a61

AUD/USD Rally Stalls Beneath Key Resistance

The daily chart shows a solid close above 0.72 for AUD/USD on Wednesday, although it handed back around half of the day’s gains after failing to test the May 2022 high at 0.7283. So while it was a strong session overall, the weak finish slightly undermined the earlier bullish momentum.

Bulls may prefer to wait for a pullback towards 0.72 before seeking fresh longs in anticipation of another attempt on 0.73. However, note that the monthly R1 pivot near 0.7381 could also provide resistance.

https://preview.redd.it/i4k8vtb8blzg1.png?width=1578&format=png&auto=webp&s=6e2ea20d5ae99b635bd44f75e574fb85846bcbd0

Source: ICE TradingView

 

NZD/USD Technical Analysis: New Zealand Dollar vs US Dollar

While the NZD/USD weekly chart still lacks a clear trend, the daily breakout is more convincing than the move seen on AUD/USD. Wednesday’s bullish range expansion marked the New Zealand dollar’s second-strongest session of the month after support formed around the 200-day and 50-day EMAs on Tuesday.

NZD/USD also held onto more of its gains into the close relative to the Australian dollar, likely only pausing because the monthly R1 pivot sits near the 0.60 handle.

From here, NZD/USD appears primed for a move towards 0.61 near the January highs. And if the kiwi continues to outperform the Aussie as suspected, it also supports a near-term bearish bias for AUD/NZD.

https://preview.redd.it/rpv0nxx9blzg1.png?width=1578&format=png&auto=webp&s=006a9730142b1bc3b7ab9a6ac509cb143dee5254

Source: ICE TradingView

Click the website link below to Check Out Our FREE "How to Trade Gold" Guide

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https://preview.redd.it/7zpgq6vcblzg1.png?width=1420&format=png&auto=webp&s=78ff990832f046f010ce7b4bba58f2385ce29e40

AUD/NZD Technical Analysis: Australian Dollar vs New Zealand Dollar

The AUD/NZD cross reached a 13-year high last week, with the Australian dollar’s rally against the New Zealand dollar over the past year marking its strongest advance since 2008. Given this acceleration builds on an uptrend that began in 2020, it suggests AUD/NZD may still have further upside potential. However, with the monthly rate of change (ROC) at 12.7%, an overbought RSI (14), and bearish divergence on RSI (2), a pullback may be required first. It is therefore worth noting the bearish reversal pattern unfolding near the cycle highs.

The daily chart shows a rising wedge, or ending diagonal — the latter named in Elliott Wave Theory because it often appears near the end of strong trends. If confirmed, the wedge projects a downside target near the cycle low at 1.1932. While AUD/NZD found support at its monthly pivot point on Wednesday, bearish momentum has since seen price break below the lower boundary of the alleged wedge. A sustained break beneath the monthly pivot point opens the door for a move towards the 50-day EMA (1.2045) near the monthly S1 pivot, bringing the 1.20 handle and 1.1932 low into view.

A break above the 1.2239 cycle high invalidates the near-term bearish bias for AUD/NZD and instead shifts focus towards the 1.23 handle near the 2011 low.

https://preview.redd.it/000qm7ueblzg1.png?width=1578&format=png&auto=webp&s=f24de61e533e284a47004733e192ba0dc099fcbf

Source: ICE TradingView

 

 

View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

https://www.forex.com/en-us/news-and-analysis/aud-usd-nzd-usd-extend-gains-though-aud-nzd-flashes-reversal-risk/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Renewed hopes for a peace deal in the Gulf, booming equities and improving Chinese growth signals are combining to drive fresh upside in AUD/USD.

By :  David Scutt,  Market Analyst

• AUD/USD trades at fresh multi-year highs after staging breakout
• Risk appetite surge and strong earnings continue to support
• China PMI data beat forecasts as new orders growth accelerated
• Sustained move above .7222 may open the door towards .7283

AUD/USD Rips Higher

AUD/USD is attempting a breakout above .7222 resistance, powered by renewed hopes for a peace deal between Iran and the United States, a solid China services PMI report, along with another surge in equities following blowout earnings from AMD.

While we’ve already seen one failed attempt above the level recently, and the price action this time around is hardly screaming conviction in the early stages, the broader bullish trend, triangle structure the pair had been coiling within over the past week, along with the message from the oscillators suggesting upside momentum is building, all point to the risk of a larger topside move if buyers can finally make it stick. If they can’t, questions will start to be asked.

https://preview.redd.it/lldpf3vlxfzg1.png?width=1001&format=png&auto=webp&s=843b780b8a4a3d59c8d71ed9145aed2614de3ce8

Source: TradingView

Should the break above .7222 hold, long setups could be considered with a tight stop beneath the level for protection, targeting the June 2022 swing high at .7283. While it’s the less favoured of the setups right now, failure to hold above .7222 could also open the door for shorts beneath the level with a tight stop above, targeting .7200 initially and, beyond that, uptrend support running from the April 1 lows located just above .7150.

Risk Appetite Remains Dominant Driver

It’s not just the technical picture that favours the bulls either. Risk appetite is surging and the correlation matrix reinforces that it remains the dominant force driving the Aussie higher.

https://preview.redd.it/43l4l1mnxfzg1.png?width=406&format=png&auto=webp&s=aa59a18d39ed9c7632fb33c9a63101c757b71245

Source: TradingView

While short-end rate differentials may still exert some influence on AUD/USD over shorter timeframes, that likely says more about fluctuations in crude oil prices than underlying economic fundamentals. Instead, the persistently strong inverse relationship with implied volatility measures for US equities and bonds, along with the similarly strong positive relationship with equity markets, helps explain why AUD/USD is trading at fresh multi-year highs.

As such, with corporate earnings, broadly, continuing to blow past expectations around the world, developments in the Gulf remain the key swing factor to monitor for broader sentiment risks.

China Link Provides Fresh Tailwinds

Adding tailwinds from a fundamental perspective, China’s Caixin services PMI beat expectations in April, lifting to 52.6 from 52.1 previously against forecasts for 52.0. The composite PMI also strengthened sharply to 53.1, signalling the second-fastest pace of expansion since May last year as activity accelerated across both manufacturing and services.

Importantly, incoming new orders rose for a 40th consecutive month, with firms linking the improvement to stronger domestic market conditions. Given the long-standing relationship between China’s economic performance and the Australian dollar as a liquid proxy for Chinese growth, the report only adds to the broader risk-positive backdrop supporting the Aussie.

https://www.forex.com/en-us/news-and-analysis/aud-usd-soars-as-stocks-china-and-hormuz-hopes-fuel-bullish-breakout/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

AUD/USD holds above 0.71 as softer bond yields trim momentum following the RBA hike, with upside targets intact for now

By :  Matt Simpson,  Market Analyst

AUD/USD is holding above key support near 0.71 following the RBA’s latest rate hike, although momentum has softened as Australian bond yields edged lower. While the central bank lifted its cash rate outlook, the move largely aligned with market expectations, limiting the upside response in the Australian dollar. With yield support easing but not reversing, the broader bullish structure remains intact, although a period of consolidation or pullback may unfold in the near term.

 

View related analysis:

• Australian Dollar Outlook: AUD/USD Hits 0.72 Into RBA, Momentum Fades
• AUD/USD, EUR/AUD Outlook: RBA Hikes Again as Inflation Pressures Build
• FX Futures Positioning: USD, USD/JPY, GBP/USD, AUD/USD | COT Report
• US Dollar Outlook: Bullish May Seasonality Meets Volatility Risk

 

RBA Hike Priced In as Softer Yields Temper AUD/USD Momentum

The RBA hiked the cash rate by 25bp to 4.35%, marking its third consecutive increase. Odds were always in favour of the move, and I’d argue the 74% probability implied by RBA cash rate futures understated the likelihood—given hawkish commentary, sticky inflation, and elevated oil prices linked to Middle East tensions.

The Statement of Monetary Policy (SOMP) saw the cash rate forecast revised higher from 4.2% to 4.7% by December. While that may appear significant, it largely aligns with market pricing ahead of the meeting, helping explain the muted market reaction. RBA cash rate futures were already implying a rate of 4.75% by December, suggesting the central bank is effectively catching up with money markets.

While their revised forecast only suggests a further 35bp of tightening from current levels by December, they left plenty of wriggle room for a more aggressive path throughout the statement.

https://preview.redd.it/ekkcgal5d9zg1.png?width=1490&format=png&auto=webp&s=8596f0b61bd8622084d207b072b7c7f31ddc8779

Source: RBA, LSEG

 

Highlights from the RBA Cash Rate Statement

• Inflation picked up materially in the second half of 2025
• Early signs that many firms are looking to increase prices of their goods and services
• Short-term measures of inflation expectations have also risen
• Inflation is likely to remain above target for some time and that the risks remain tilted to the upside, including to inflation expectations
• With the conflict in the Middle East continuing, there are plausible scenarios where inflation is higher and activity lower than envisaged under the baseline forecast
• Eight members voted to hike, one voted to hold

Click the website link below to Check Out Our FREE "How to Trade AUD/USD" Guide

https://www.forex.com/en-us/whitepapers/

https://preview.redd.it/lu3bils9d9zg1.png?width=1420&format=png&auto=webp&s=543dc2f129c5a0f51052aa8d6391d828b3fde603

Australian Bond Yields Ease, Trimming AUD Momentum

The fact that Australian bond yields are slightly lower across the curve on the day suggests the RBA’s revised cash rate outlook was not as hawkish as some had feared. While the central bank lifted its terminal rate projection, the move largely aligned with prior market pricing, prompting a modest pullback in yields rather than a fresh repricing higher.

This has seen the AU–US 2-year yield spread edge lower, driven by softer domestic yields, which in turn has taken some momentum out of the Australian dollar. However, the spread remains positive overall, meaning the Aussie still retains a relative yield advantage against the US dollar.

With AUD already posting a strong multi-week rally, this mild cooling in yield support could be enough to trigger a near-term consolidation or pullback across some FX crosses. That said, unless the AU–US yield differential compresses more aggressively, any downside may prove corrective rather than the start of a broader reversal.

https://preview.redd.it/8zisuu1bd9zg1.png?width=1753&format=png&auto=webp&s=d7ff907ea35ebcfb297741884be667741bd53986

Source: ASX24, LSEG, TradingView

 

Australian Dollar Technical Analysis

AUD/USD Outlook: Bullish Above 0.71, But Momentum Softens

I have outlined in prior articles that my bias for AUD/USD remains bullish while prices hold above last week’s low near 0.71. Momentum has softened following the RBA meeting, although volatility remains contained. As such, I see no change to the broader outlook, with AUD/USD targeting 0.73 initially and potentially extending towards 0.75 if it continues to hold above 0.71.

However, should the US dollar continue to strengthen, a deeper pullback towards 0.70 could be on the cards. Even then, I would still favour a higher Australian dollar over the coming months.

 

Click the website link below to Check Out Our FREE "How to Trade USD/JPY" Guide

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https://preview.redd.it/tx83begfd9zg1.png?width=1420&format=png&auto=webp&s=b842359116f1ba37454acbfe488eb54f344b3841

AUD/JPY Outlook: Bearish Reversal Signals Further Pullback

The tight consolidation around 114 had a false breakout to the upside before suspected MOF intervention sent the Japanese yen broadly higher. This saw momentum turn sharply lower on AUD/JPY, highlighting the potential for at least one more leg down.

A small bearish outside day formed on Monday, while the BOJ continues to jawbone the yen. Given the extended move higher in the Australian dollar, a move towards 109 or a retest of the 1991 and 2024 highs could be on the cards.

 

AUD/NZD Outlook: Rising Wedge Signals Reversal Risk

This is another Australian dollar cross that has benefited from a strong uptrend since April 2025. However, price action on the daily AUD/NZD chart points to a potential rising wedge pattern, placing the cross on alert for a bearish reversal.

If confirmed, the pattern projects a move towards the cycle lows near 1.4937.

 

GBP/AUD Outlook: Bounce Risk Builds Within Downtrend

Momentum is attempting to turn higher on the GBP/AUD daily chart. While it may seem “brave” to push against the established downtrend, the formation of a higher low relative to March provides some encouragement for a near-term bounce.

With signs of potential weakness in the Australian dollar emerging elsewhere, GBP/AUD may be able to extend higher in the short term before sellers look to reassert control.

https://preview.redd.it/5gxzblhhd9zg1.png?width=1750&format=png&auto=webp&s=45520671b9c893c4b141922503c72773ef9ba77b

Source: ICE TradingView

 

 

View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

https://www.forex.com/en-us/news-and-analysis/aud-usd-outlook-rba-hike-priced-in-as-yields-ease-momentum-fades/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Back in the intervention zone, USD/JPY is trading off a repeatable pattern of sharp reversals and session timing, offering traders a framework, not certainty.

By :  David Scutt,  Market Analyst

• USD/JPY back testing intervention zone around 157.30
• Sharp drops have been seen in very early European trade recently
• Japan, China remain offline, creating poor liquidity conditions
• US-Japan yield spreads and energy backdrop favour buying dips

Testing the intervention zone

USD/JPY finds itself back testing the zone Japan's Ministry of Finance (MoF) has likely instructed the Bank of Japan (BOJ) to intervene in, following the initial episode last Thursday that saw the pair dump from above 160 to below 156 in rapid fashion.

As seen in the five-minute tick chart below, price action is consistent with intervention not only taking place at a familiar level but also at certain times in the Asian session, with abrupt pullbacks often occurring into the very early stages of European trade. There's no guarantee the pattern will continue, but it provides something akin to a blueprint for traders to use when assessing near-term directional risks.

https://preview.redd.it/02tio92mm7zg1.png?width=1835&format=png&auto=webp&s=36401838852ce7fb66dc5790149fb78902bd4b19

Source: TradingView

Risk-reward favours patience

Before looking at specific setups, in an environment such as this, capital preservation should be at the forefront of every decision. If you get it wrong coming up against a central bank armed with trillions in foreign reserves, it can be costly and then some.

Based on price action over recent days, we've seen abrupt declines take place when the price has moved towards 157.30, which happens to coincide with the location of the 100-day moving average, shown on the daily chart below, so that's an immediate level overhead to pay attention to. For those who think the likely intervention pattern will continue, shorts could be set on probes of the level with a tight stop above for protection should the wall of offers fail to materialise.

https://preview.redd.it/1013ouonm7zg1.png?width=1000&format=png&auto=webp&s=a748591732f8c694f381909d97f6fd26e4d9502a

Source: TradingView

As for targets, we've now seen three probes beneath 156 over three consecutive days, making it a logical point to take profits. It also looms as a decent level to consider long setups from, given shorts in the current environment go against the prevailing fundamental macro view. If we were to see another abrupt push beneath 156.00 towards minor support at 155.64 that fails to extend further, longs could be established with a stop beneath the recent lows for protection, targeting 157.30.

This setup screens as more appealing, not only because of the clean range that's been established over the past few days but also the knowledge that rate differentials are swinging back in favour of the United States, as seen in the spread between two and five-year US and Japanese bond yields in the chart below.

Macro backdrop supports USD

The US also has a fundamental advantage of being a net energy exporter, even if not totally self-sufficient when it comes to crude oil. That puts it in a very different place to Japan, which is a major net energy importer, leaving it exposed not only to higher prices but also scarcity concerns and weaker international demand for Japanese manufactured goods the longer the Strait of Hormuz remains shuttered.

The yen should be pressured given the environment, making buying dips look far more appealing on fundamental grounds rather than playing it from the short side, which is currently reliant upon continued intervention or verbal warnings.

https://preview.redd.it/7f4fv73pm7zg1.png?width=1838&format=png&auto=webp&s=df8613d3a6346d9b73cb709db66027a1a0d5d922

Source: TradingView

After a slow start to the week, we're now at the point where the macro calendar starts to pick up ahead of the release of US nonfarm payrolls on Friday. Rather than go over old ground, for those interested in what may be influential and what comes across as merely noise, I'd direct you to the weekly primer I wrote over the weekend.

https://www.forex.com/en-us/news-and-analysis/usd-jpy-outlook-testing-the-mof-zone-as-intervention-risk-intensifies/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The Australian dollar has started the week with a slight short-term weakness, as AUD/USD posted a decline of around 0.5% in the first session. However, this move does not change the broader picture, as the pair remains in a predominantly bullish trend, with market focus now centered on today’s Reserve Bank of Australia decision, which could be key in shaping AUD strength in the near term.

By :  Julian Pineda CFA, CMT,  Market Analyst

The Australian dollar has started the week with a slight short-term weakness, as AUD/USD posted a decline of around 0.5% in the first session. However, this move does not change the broader picture, as the pair remains in a predominantly bullish trend, with market focus now centered on today’s Reserve Bank of Australia decision, which could be key in shaping AUD strength in the near term.

In this context, if the central bank maintains or reinforces a more aggressive monetary policy stance, it could help sustain more stable buying pressure in AUD/USD, particularly against other central banks that remain on hold.

Click the website link below to Check Out Our FREE "How to Trade AUD/USD" Guide

https://www.forex.com/en-us/whitepapers/

https://preview.redd.it/pu2bfz9q17zg1.png?width=1420&format=png&auto=webp&s=242501d57bc036b61b10642fae316c08ec6a6316

RBA decision day arrives

The Reserve Bank of Australia is set to announce its interest rate decision today, and market consensus suggests it could be one of the few central banks continuing to raise rates. Specifically, rates are expected to increase from 4.10% to 4.35%, in line with the tightening cycle seen in recent months.

This scenario is largely priced in, as previous decisions have aligned closely with market expectations. However, the key focus will be on the forward guidance, where the central bank may signal whether further hikes remain on the table.

https://preview.redd.it/xnfqvwcs17zg1.png?width=942&format=png&auto=webp&s=92c8219e3f63fb62e05c086dd4c1effb69bc6e8c

Source: ForexFactory

If the central bank emphasizes the need to continue tightening, this could reinforce the relative strength of the Australian dollar against the US dollar, especially considering that the expected 4.35% rate would remain well above the Federal Reserve’s 3.75% benchmark.

This rate differential has been a key driver behind AUD strength in recent months and could remain so if Australia continues to adopt a more aggressive stance than the US.

At the same time, this policy stance is supported by inflation data. The RBA’s upper target is 3.00%, yet inflation remains elevated, standing around 4.6% in March—well above the 1.9% low recorded in June 2025.

This indicates that inflation has not shown a consistent slowdown, justifying a more prolonged restrictive stance.

https://preview.redd.it/rs5it1ot17zg1.png?width=1200&format=png&auto=webp&s=18b0bfc01669470d6ca081bea93338dbeac8725c

Source: TradingEconomics

This dynamic is also reflected in the bond market, where Australian 10-year yields remain above 5.00%, clearly outperforming US Treasuries, which are currently around 4.45%.

This gap continues to favor AUD-denominated assets, as they offer higher relative returns, supporting the currency’s structural strength in recent months.

https://preview.redd.it/yy22eisu17zg1.png?width=1500&format=png&auto=webp&s=99a861bdb41abb26d820fd4acff122115c131b1f

Source: TradingEconomics

Taking all of this into account, the market logic remains consistent: a central bank in an active tightening cycle versus a Federal Reserve on pause keeps AUD attractive. If the RBA confirms that further hikes are likely, this could support continued demand for the Australian dollar and help stabilize bullish pressure in AUD/USD in the short to medium term.

 

Technical outlook for AUD/USD

https://preview.redd.it/gvepbv1w17zg1.png?width=1538&format=png&auto=webp&s=2badac25439dfec4bf1a48531246503ef817d4cd

Source: StoneX, Tradingview

• Uptrend remains relevant: For several months, AUD/USD has maintained a long-term upward trendline, which continues to be the dominant technical structure. So far, no significant corrections have been strong enough to challenge this trend, suggesting that the bullish bias remains intact. As long as buying pressure holds, this structure is likely to continue guiding price action in the coming weeks.  
• RSI: The RSI remains slightly above the 50 level, indicating that buying pressure remains relevant in the short term. If the indicator continues to recover, it could reinforce a clearer bullish bias in price behavior.  
• TRIX: Similarly, the TRIX indicator remains above the zero level, reflecting that the underlying trend momentum remains in positive territory. This supports the view that the broader structure continues to favor the upside.

 

Key levels:

• 0.74559 – Key resistance: A level of highs not seen since April 2022. Moves toward this zone could reinforce the dominant bullish bias and open the door to further upside extension in the coming weeks.  
• 0.71835 – Near-term barrier: A key reference zone where consistent pullbacks have been observed. A sustained move above this level could trigger a stronger short-term bullish move.  
• 0.69318 – Key support: A level located below the 50-period moving average. A move toward this area could weaken the current structure and lead to a more defined phase of indecision or consolidation in the coming weeks.

 

Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25

https://www.forex.com/en-us/news-and-analysis/audusd-analysis-whats-next-for-the-australian-dollar-ahead-of-the-central-bank-decision/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Another Trump ‘Truth’, another lift in risk appetite. But with a reversal signal in place and plenty of unanswered questions around “Project Freedom”, will the initial move in USD/CAD stick?

By :  David Scutt,  Market Analyst

• Trump flags “Project Freedom” while talking up negotiations with Iran
• Recent Loonie strength driven by risk appetite, not rate differentials
• Hammer after extended drop warns of reversal risk

“Project Freedom” boosts risk Loonie

USD/CAD has opened the week on the back foot having closed at the lowest level since early March on Friday, hit by another well timed Truth Social post from Donald Trump late Sunday just ahead of the Globex reopen, lifting risk sentiment and weighing on the US dollar.

Trump flagged plans to guide ships out of the Strait of Hormuz starting Monday while again talking up “very positive” discussions with Iran, delivering an optimistic assessment seen repeatedly in early Asian trade since the war began in late March. Whether the initial moves will stick is another matter, however.

There is no detail on how “Project Freedom” will work, whether shipping firms and insurers take part, or whether Iran will even allow it. Only hours earlier there were unsubstantiated reports of Iran laying mines in the Strait again, so headline risk remains elevated, especially with Japan and China offline for holidays.

Risk appetite remains dominant driver

https://preview.redd.it/thv5tj59r0zg1.png?width=494&format=png&auto=webp&s=b56b671f2ff1f1d0f462f031ca6d228a1fdbea38

Source: TradingView

While questions remain, the initial reaction in the Loonie should come as no surprise given clear evidence of what’s been behind the bearish move in USD/CAD recently. With both Canada and the United States major energy producers and yield differentials having mattered little over both the short and longer term, the correlation matrix above reveals a tight inverse relationship with equities, including Vanguard’s Total World ETF and S&P 500 futures, alongside a modest positive link with implied volatility. It suggests the Loonie’s run has been fuelled by risk appetite, not rates.

For now, risk appetite and headlines around the Strait look set to remain in control. Later in the week, US and Canadian employment data may start to influence positioning and hedging flows given the strength in the Canadian dollar, but unless that materially shifts rate expectations, the near-term direction is still likely to hinge on how this latest round of headlines holds up.

Hammer warns bear trend may stall

https://preview.redd.it/pas6p4a3r0zg1.png?width=1001&format=png&auto=webp&s=f0ea605fdabf7201592a166e19dfca9e9a4c6601

Source: TradingView

While the current backdrop points to downside risk, the price action in USD/CAD on Friday provided a contradictory signal, with a hammer on the daily timeframe hinting at the start of a potential trend change, especially coming after the prolonged bear move we’ve seen. Earnings optimism looks close to being fully priced, and equities have priced the end of the war more times than one can remember, so there is a narrative building that suggests the signal may be worth paying attention to.

Of course, one hammer candle does not make a bullish trend, so the price action today will be important when it comes to validating or invalidating the signal. 1.3600 looms as the first level overhead that could challenge any bullish revival, having acted as resistance previously before briefly flipping to support last week. Having broken beneath it on Thursday, it may now revert to offering resistance, making it a level to watch when assessing both the bullish signal and potential setups.

An inability to recover 1.3600 would allow for shorts to be set with a stop above for protection, targeting Friday’s low just above 1.3550 initially, with the March nine swing low of 1.3525 and January 30 swing low of 1.3483 as further downside targets. The message from RSI (14) and MACD continues to favour selling into strength, with the former holding beneath 50 while threatening to set fresh lows, like the price, while the latter continues to grind further into negative territory having already crossed the signal line from above.

However, just because the oscillators favour playing the pair from the short side does not rule out looking at longs altogether. If the price can reclaim and hold above 1.3600 into the European open, another setup would be to initiate longs with a tight stop beneath, targeting 1.3710 resistance which capped the pair over the past fortnight. Beyond that, the convergence of the 50 and 100-day moving averages marginally overhead presents a high hurdle for additional upside should the price return to test there.

https://www.forex.com/en-us/news-and-analysis/usd-cad-outlook-project-freedom-delivers-downside-hammer-says-watch-out/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

AUD/USD soared on Thursday as Japan intervention speculation hit the US dollar, lifting the pair back towards range highs and putting a potential bullish breakout in focus.

By :  David Scutt,  Market Analyst

• Japan intervention speculation weighs on US dollar
• Risk of follow up intervention in thin Asia trade
• Hormuz headlines key swing factor for directional risk
• AUD/USD near range highs, breakout beckoning?

Summary

Japan’s likely FX intervention has temporarily removed a key macro headwind, triggering USD weakness and reigniting risk appetite, lifting AUD/USD back towards range highs. With the Aussie highly sensitive to volatility, yields and energy prices, the near-term setup favours further upside, especially if intervention resumes. Technically, the close above 0.7188 and support from the late-March uptrend keeps the bullish case intact, opening a move towards 0.7222 and 0.7283.

Macro brake released, Aussie rebounds

It’s highly likely the Japan's Ministry of Finance instructed the Bank of Japan to intervene to strengthen the yen on Thursday, with speculation it may also have been active in crude oil futures. As is usually the case when Japan intervenes, authorities have neither confirmed nor denied any action, although it was obvious from the language used beforehand that patience was wearing thin as USD/JPY hit levels not seen since mid-2024.

Pushing aside the speculation over what may or may not have occurred, the market impact was undeniable. Since the Iran war began, the combination of soaring crude prices, higher bond yields and a stronger dollar had acted as a brake on what has otherwise been a bullish environment for risk assets over the past month. When that brake was abruptly removed, risk ripped, including the risk-sensitive Australian dollar, sending AUD/USD back towards the top of the sideways range it has traded in for more than a fortnight.

https://preview.redd.it/bdpwytqdjgyg1.png?width=700&format=png&auto=webp&s=de7902bad76e54ffde21ab04033dc7d2d7af57a2

Source: TradingView

A quick glance at my correlation matrix tracking relationships between the Aussie and other financial assets over the past week, month and quarter shows it has been highly sensitive to shifts across multiple asset classes recently. It’s demonstrated strong positive relationships with yield differentials against the United States and riskier assets, proxied by the S&P 500, along with equally strong negative correlations with energy prices and implied volatility measures. Against that backdrop, it’s no surprise the Aussie went ballistic. It was close to a perfect storm for it to surge.

Extending the time horizon, it’s clear the Aussie continues to sing to the tune of broader risk appetite, suggesting that’s likely the more reliable guide when assessing directional risks ahead.

The question now is whether Thursday’s surge can stick, and beyond that, whether it may prove to be the catalyst for a bullish breakout.

Range highs back in focus

As seen on the daily chart below, while AUD/USD remains below the high set on April 17, it’s notable Thursday’s close was above 0.7188, the swing high set in early March. That differentiates this probe from earlier attempts which failed, delivering downside reversals. While not a textbook setup, it’s also notable the bounce yesterday originated from the uptrend established from the late March lows, continuing the pattern of dips towards 0.7100 being bought.

https://preview.redd.it/zbdtk14fjgyg1.png?width=1001&format=png&auto=webp&s=9b225489d6145221a40030a6ea8f50696167e0b5

Source: TradingView

Despite bearish divergence with price, RSI (14) remains well above 50 while MACD continues to sit above the signal line in positive territory. Upside momentum is no longer building, but it remains with the bulls for now. With the pair sitting above key medium and longer-term moving averages, all with positive slopes, the case for a resumption of the bullish trend is building.

I’m not rushing to set longs, especially with many Asian markets shut for Labour Day holidays, but if AUD/USD can hold above 0.7188 as flows pick up into the European session, entries above the level with a tight stop beneath look like a decent setup, targeting the June 2022 high of 0.7283. The April 17 high of 0.7222 is the immediate level overhead to watch, with hesitation there perhaps a signal to take some or all risk off the table.

Risk appetite key, watch Hormuz headlines

As for potential volatility catalysts into the weekend, there’s a decent risk of follow-up intervention in the yen should weakness resume, as seen in early Asian trade. That would send a powerful message that the MoF means business in capping yen weakness. If that eventuates, it would likely result in further US dollar weakness, adding to the case for additional Aussie upside.

Likewise, headlines relating to the Strait of Hormuz remain critical, both today and over the longer term. With optimism surrounding earnings largely in place and an RBA rate hike next week close to fully priced, developments in the Gulf remain a key swing factor for cyclical risk assets, potentially determining whether this breakout attempt sizzles or fizzles.

https://www.forex.com/en-us/news-and-analysis/aud-usd-rips-as-dollar-dumps-on-intervention-speculation/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

USD/JPY plunged nearly 500 pips as suspected MOF intervention hit the market. While volatility typically fades after the initial shock, history shows these events often coincide with major turning points.

By :  Matt Simpson,  Market Analyst

Traders cannot say Thursday’s surge in the Japanese yen came without warning. Japan’s top FX diplomat had already issued what he called a “final warning” just hours earlier. The near 500-pip drop in USD/JPY certainly fits the profile of a classic intervention by the Ministry of Finance Japan—although, as is typical, official confirmation has yet to come.

Naturally, this has traders on edge for a potential second wave of volatility. But officials would likely need to be provoked again for moves of that magnitude to repeat. Besides, history suggests volatility tends to diminish after the initial intervention.

When you watch charts all day, you develop a feel for how volatility behaves around major events. Still, it pays to run the numbers—and in this case, they back it up.

 

View related analysis:

• US Dollar Outlook: Bullish May Seasonality Meets Volatility Risk
• US Dollar, Yields Rally Post-Fed as USD/JPY Tests Resistance
• Euro Price Action Setups into FOMC: EUR/USD, EUR/CAD, EUR/JPY

 

Japanese Yen Intervention: Volatility Patterns and Market Impact

Volatility in the Japanese yen peaks on the day of intervention, then fades in the sessions that follow. The sample size may be small and well below the textbook 30, but the pattern is clear: an initial spike in volatility followed by compression and choppier trade.

• USD/JPY averages a -1.2% decline on intervention day (median -1.45%)
• The average daily range expands to ~3.1% (median 3.33%)
• There is no strong directional bias from T+1 to T+6, reinforcing the idea of consolidation rather than trend
• Daily ranges steadily contract after T+0

https://preview.redd.it/ameeqatssfyg1.png?width=796&format=png&auto=webp&s=3952f3c4de50aaf61b07d76d9692e3c90007a929

Source: LSEG

This isn’t unique to intervention. You see similar behaviour after most market shocks: volatility explodes on impact, then fades as traders regroup and reassess positioning. However, just because volatility diminishes does not mean there is no impact, as intervention usually preceded turning points on USD/JPY.

 

Click the website link below to Check Out Our FREE "How to Trade USD/JPY" Guide

https://www.forex.com/en-us/whitepapers/

https://preview.redd.it/57qnhqixsfyg1.png?width=1420&format=png&auto=webp&s=2254a719cc04af584debd8aded91eae0137cced0

USD/JPY Technical Analysis: US Dollar vs Japanese Yen

Intervention and Turning Points on USD/JPY

Zooming out, intervention tends to coincide with meaningful turning points, regardless of the underlying fundamentals. Of the four major interventions between 2022 and 2024, three aligned with significant reversals. The remaining case saw USD/JPY rebound after an initial ~850-pip drop, but even then it took around two months to break above the prior intervention high—ultimately triggering another intervention and a broader -13.7% downtrend of over 2,200 pips.

https://preview.redd.it/zy32kzwysfyg1.png?width=1361&format=png&auto=webp&s=2e6a2e2f7d7f911dd551fc320fe5f9d00d5d15e2

Source: ICE, TradingView

 

USD/JPY Short-Term Outlook: Bearish Bias Below 158

The daily chart shows a clear bearish engulfing candle, with prices retracing from the lows during today’s Asian session. But with the monthly pivot, range lows and the 158 handle nearby as potential resistance, it almost invites bears to fade into strength.

The 1-hour chart shows momentum pushing higher into that zone, but unless traders are keen to goad the MOF into further action, my bias is for a swing high to form just below—or around—the 158 area.

Note the 200-day averages and long term bullish trendline that could become bearish targets, should momentum roll over once more.

https://preview.redd.it/rziwur30tfyg1.png?width=1622&format=png&auto=webp&s=515e7606e339aa08f0d8e47f5164099ab68a90f1

Source: ICE, TradingView

 

View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

https://www.forex.com/en-us/news-and-analysis/japanese-yen-intervention-volatility-fades-but-turning-points-emerge/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Markets are already hawkishly positioned on both the ECB and BoE, but with energy driving inflation expectations and broader sentiment, policy signals may struggle to generate anything more than short-lived moves

By :  David Scutt,  Market Analyst

• EUR/USD and GBP/USD trading as crude proxies, not rate plays
• Strong inverse correlation with oil driving moves over the past week
• ECB and BoE expected to hold, hikes already priced
• Communication key, but energy still steering expectations
• Both pairs rangebound, providing clean levels to work with

Energy driving FX, not rates

The impact from the ECB and BoE monetary policy decisions later today may prove fleeting if it runs counter to what’s happening in energy markets, with both EUR/USD and GBP/USD effectively trading as proxies for crude right now rather than rate differentials.

https://preview.redd.it/52oe52x3g8yg1.png?width=992&format=png&auto=webp&s=dee7b215a3382ab4aea8f4b845fa5f8d706109b8

Source: TradingView

The correlation matrix makes that clear. Over the past five days, both pairs show a near-perfect inverse relationship with Brent, sitting around -0.96 to -0.97, meaning when crude rises, EUR/USD and GBP/USD have almost consistently fallen, and vice versa. For context, a correlation coefficient close to -1 signals a very strong inverse relationship, while +1 indicates they move in lockstep.

That relationship dominates everything else. Even the positive correlation with equities is being influenced by moves in crude, with energy driving broader sentiment and taking focus away from earnings. Rate differentials, particularly at the front-end, show little sustained relationship. Even where correlations with two-year spreads are positive, they’re weak and inconsistent across time horizons, underlining that moves in EUR/USD and GBP/USD are not being driven by rates right now.

Hawkish pricing already embedded

https://preview.redd.it/vzadydk5g8yg1.png?width=1327&format=png&auto=webp&s=be2b053d1a3a7af17d51a4d040865f0124034ccf

Source: Bloomberg 

That leaves both the ECB and BoE decisions later today likely to have less impact than usual. Neither is expected to move, but markets are already hawkishly positioned, with OIS pricing more than three hikes over the next year for both, something clearly reflected in the Bloomberg graphic on implied policy rate probabilities. The ECB is effectively fully priced to pull the trigger in June with the BoE not far off. That means the tone needs to be clearly hawkish to justify what’s already in the curve, especially given the inflation impulse coming from energy.

Assuming no surprise hike from either, the focus shifts to communication. For the ECB, it’s all about the tone of the statement and President Christine Lagarde’s press conference, including any hints of disunity within the Governing Council, particularly if more members are leaning towards hiking. For the BoE, the vote split will be key, with multiple dissents in favour of a hike likely needed to at least meet market expectations. The wording of the statement and updated forecasts will also need to lean clearly hawkish to justify what’s already priced into the curve.

Data and decisions collide

https://preview.redd.it/adpqm7l6g8yg1.png?width=1281&format=png&auto=webp&s=b3a0b023165ddd512e49e76215841cef96fd10bd

Source: TradingView

The rate decisions and key economic data will arrive in quick succession through the London session. Euro area flash GDP and inflation data hit at 10am, followed by the BoE decision at 12pm, then the ECB rate call at 13:15pm and President Christine Lagarde’s press conference at 1:45pm. While the GDP and CPI releases will provide an updated snapshot on activity and price pressures, they continue to play a secondary role for FX at the moment. With the outlook for energy prices likely to heavily influence both growth and inflation from here, backward-looking data offers limited value in deciphering the reaction function from either central bank, or how FX responds around these events.

Trading the range

With that macro backdrop dominated by energy markets, both EUR/USD and GBP/USD head into these risk trading within well-defined ranges, providing clear levels for traders to work with when assessing setups.

https://preview.redd.it/nja7jh48g8yg1.png?width=1001&format=png&auto=webp&s=f387faaac96a4a9e238ad988064026d994aac0d1

Source: TradingView

EUR/USD trades at the bottom of its prevailing sideways range, continuing to attract bids on dips towards the confluence of the 200-day moving average and horizontal support at 1.1670. That’s the immediate downside level to watch, along with the 50-day moving average located marginally below.

Should we see a sustained break beneath this support zone, there’s not a lot in the way of major technical levels until just above 1.1400 where the pair has attracted buying over the past nine months. 1.1600 is a level of note in between, along with 1.1450.

Should the support zone hold, 1.1720 is where the pair topped out earlier this week. It’s the immediate level overhead of note, with the top of the prevailing range at 1.1850 the next after that.

Mirroring the price action, upside strength has all but evaporated recently with RSI (14) breaking its uptrend and now sitting around 50, while MACD has crossed the signal line from above and is pushing back towards zero. The message from the oscillators is that neither bulls nor bears have the ascendency, putting emphasis on price action to assess directional risks rather than retaining a specific bias.

The pair looks heavy right now, struggling to bounce from the support zone, but I wouldn’t be prepared to act on it unless we see a clean downside break.

https://preview.redd.it/33plqra9g8yg1.png?width=1001&format=png&auto=webp&s=4db197eed6a7b0957df3327aa9202212bf6c4005

Source: TradingView

It’s a similar setup for GBP/USD which is rangebound between 1.3450 on the downside and 1.3591 on the topside. You can see the pair has attracted bids at the 100-day moving average in recent days, providing an immediate reference point to build trades around.

If the price were to bounce and break above 1.3591, 1.3700 and 1.3749 are resistance levels of note. Beneath 1.3450, the confluence of the 50 and 200-day moving averages creates a high near-term hurdle for bears, perhaps explaining why there’s been little willingness to test them in recent days, even with an increasingly bearish backdrop that would generally favour USD strength.

If we were to see a break and hold beneath this moving average zone, 1.3348 is a minor level to watch, with 1.3180 a far more important support level underneath.

The message from RSI (14) and MACD is waning upside strength, even if bulls marginally have the ascendency for now. The former continues to trend higher but is only marginally above 50, while the latter has just crossed the signal line from above but is holding in positive territory. It’s more a cautious signal for bulls rather than a green light for bears to load up.

Price action, as is the case with EUR/USD, may therefore be more informative on directional risks from here.

https://www.forex.com/en-us/news-and-analysis/eur-usd-gbp-usd-crude-calling-the-shots-into-ecb-and-boe/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

US dollar and yields rally after hawkish Fed hold, with USD/JPY testing 160 resistance and DXY approaching key gap levels near 99.

By :  Matt Simpson,  Market Analyst

US bond yields surged and the US dollar was the strongest major currency on Wednesday after the Fed held rates and signalled just one 25bp cut ahead. While markets weren’t pricing in any cuts beforehand, the shift in Fed funds projections can still be seen as hawkish relative to the Fed’s prior outlook.

Jerome Powell also pushed back against political pressure, vowing to remain on the FOMC board to preserve its independence and describing Trump’s attacks as “unprecedented”.

The overall tone leans more hawkish than markets—and Trump—would have preferred, reinforcing expectations that the Fed is in no rush to ease policy despite lingering inflation risks.

 

View related analysis:

• Euro Price Action Setups into FOMC: EUR/USD, EUR/CAD, EUR/JPY
• Australian Dollar Outlook: AUD/USD, AUD/JPY, GBP/AUD Ahead of CPI, FOMC
• Japanese Yen Outlook: AUD/JPY Breakout Ahead of BOJ, USD/JPY Holds Steady
• FX Futures Positioning: US Dollar, EUR, JPY, CAD | COT report

 

Market Reaction: US Dollar, Yields and Equities

• Us 2-year yield rose 10.9bp to 3.95%, more than twice its average daily rise of 3.2bp over the past year while the 10-year yield hit 4.1%
• The US dollar was the strongest FX major, sending DXY (USD index) up 0.36% to a 12-day high
• AUD/USD and NZD/USD were the weakest majors, which were dragged lower alongside metals such as gold, copper
• Crude oil easily withstood US dollar strength with it looking increasingly likely the Straight of Hormoz will remain closed indefinitely
• Wall Street indices fell in the final hour of trade with Nasdaq futures down -0.7%, Dow Jones -0.5% and S&P 500 -0.4% into the close

https://preview.redd.it/l0l4vienk7yg1.png?width=703&format=png&auto=webp&s=23b2fae2cd414e30c9a552e9d2119f11811b61e3

US Dollar Index (DXY) Technical Analysis

USD Index Tests 99 Resistance as Momentum Builds

Momentum has turned higher for the US dollar, with the USD index pushing above last week’s high and testing gap resistance near the 99 handle.

Rising volume alongside prices suggests the move could extend in the near term, bringing 99.09 into focus and potentially a move into the gap towards 99.68.

However, EUR/USD is sitting on its 50-day EMA and 200-day SMA near key historical support. If this area holds, it could cap USD upside in the near term, making the euro a useful confirmation signal for dollar direction.

 

Click the website link below to Check Out Our FREE "How to Trade EUR/USD" Guide

https://www.forex.com/en-us/whitepapers/

https://preview.redd.it/xhajubdqk7yg1.png?width=1420&format=png&auto=webp&s=bc3c68e3b3d392692241555f1d37c4fa7f83c2e8

US Dollar Rally Looks Corrective Within Bearish Structure

While near-term momentum points higher, the broader outlook for the US dollar remains bearish in my view. I suspect a significant top formed on March 31, with the current rally from ~97.50 appearing corrective against that decline.

This keeps the focus on identifying a potential swing high on the daily chart, with EUR/USD likely providing confirmation if it forms a corresponding swing low.

https://preview.redd.it/5xk8gl7xk7yg1.png?width=1699&format=png&auto=webp&s=4db3b33f7e45d420bef34fbe21fefa8a23d23aa9

Source: ICE, Forex.com, TradingView

 

USD/JPY Technical Analysis: US Dollar vs Japanese Yen

USD/JPY Breaks Above 160

The Japanese yen may not have been the weakest currency on Wednesday—that honour went to the Australian and New Zealand dollars—but its losses against the US dollar have produced some of the cleanest price action on USD/JPY among the majors.

The 0.5% rise for USD/JPY marked its best day in 19 sessions and saw it close comfortably above 160 at a four-week high. This begs the question of whether we’ll see a breakout in today’s Asian session, although I feel compelled to urge caution.

Click the website link below to Check Out Our FREE "How to Trade USD/JPY" Guide

https://www.forex.com/en-us/whitepapers/

https://preview.redd.it/rc7npl15l7yg1.png?width=1420&format=png&auto=webp&s=3139aef0cf900d7a1893767a4d910e51ca1f5c63

160 Remains a Key Level

160 is a big enough level in its own right to break, but it has been closely watched for over a month and previously triggered a selloff on March 30 after just a single day above it—one day prior to the top on the US dollar index.

The 4-hour chart shows USD/JPY probed the March high but fell just short of the weekly R2 pivot point before retracing into the US close. With EUR/USD sitting on key support, a case could be made for a pause or minor retracement from current levels—even if USD/JPY seems destined to eventually break higher anyway.

Bullish Bias Holds Above 160

The trend on the daily chart is clearly bullish, and we’ve seen sufficient sideways trade to justify a breakout. We just need to clear the bump in the road around the March high first.

That could mean choppy trade or a pullback before liftoff. The bias remains bullish while USD/JPY holds above 160, as this level could be the difference between a minor dip or a deeper pullback.

https://preview.redd.it/hnhahu76l7yg1.png?width=1699&format=png&auto=webp&s=8a61edaaadf356111aac63054113b5e9221cf541

Source: ICE, Forex.com, TradingView

 

 

View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

https://www.forex.com/en-us/news-and-analysis/us-dollar-yields-rally-post-fed-as-usd-jpy-tests-resistance/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Australia’s CPI report was strong on the surface, softer underneath. Traders cut RBA hike odds, but AUD/USD stayed elevated as risk sentiment and tech earnings dominate.

By :  David Scutt,  Market Analyst

• Headline CPI jumps 1.1% in March, annual pace accelerates to 4.6%
• Quarterly trimmed mean at 0.8% undershot RBA forecasts
• Three RBA hikes still favoured this year despite softer May pricing
• Risk appetite may matter more than rates for AUD/USD

Summary

Australian inflation accelerated sharply in March as the early impact of the Iran war flowed through via higher energy prices, but the overall result was not as severe as feared and underlying measures did not materially worsen. That helped trim expectations for the scale of further RBA tightening, although markets still see a high chance of a hike next week with another two moves largely priced by year-end.

For AUD/USD, the inflation report triggered only a brief dip, suggesting rate expectations are not the main driver right now. Instead, the Aussie appears more tied to broader risk sentiment, leaving the near-term focus on US tech earnings, the FOMC decision and whether the pair can hold above former resistance near .7158.

Hot headline, calmer underneath… for now

Headline inflation jumped 1.1% in March, leaving the increase from a year earlier at 4.6%, two tenths beneath the median economist forecast of 4.8%. The monthly gain was driven primarily by a 32.8% surge in automotive fuel prices, the largest increase since the series began in 2017, reflecting the earlier spike in global energy prices tied to the Iran conflict. Housing also remained a major contributor, with electricity prices elevated following the expiry of government rebates.

https://preview.redd.it/hyuh2k1ky1yg1.png?width=1980&format=png&auto=webp&s=32daa7e48256535173ba85000e9c73c65fcd48c1

Source: ABS

Of more importance to markets and the RBA, underlying price pressures remained relatively contained, albeit at uncomfortably high levels. Trimmed mean inflation, which measures the average price increase across the ABS basket once the top and bottom 15% of weighted price moves are removed, rose 0.3% over the month, up from 0.2% in February but in line with market expectations. From a year earlier, it remained at 3.3%.

With the monthly inflation series only relatively new in Australia, the RBA continues to place heavy weight on quarterly trimmed mean outcomes, the measure it relied on before the monthly series was introduced late last year. While still running at levels inconsistent with the Bank achieving its 2.5% inflation target, the good news was the 0.8% quarterly outcome was a tenth below both the RBA and median economist forecast, slowing slightly from the 0.9% pace seen in the final quarter of last year. From a year earlier, this key inflation measure ticked up to 3.5%, in line with forecasts and a tenth above the prior quarter.

There was clear evidence of an early Iran war pass through in the trade-exposed parts of the basket. Annual tradables inflation, covering items more exposed to global pricing forces such as fuel, food, clothing and footwear, jumped to 4.5% in March from 1.3% in February.

By contrast, annual non-tradables inflation, covering areas driven more by domestic factors such as housing and education, eased to 4.6% from 5.0%. Electricity, new dwellings and rents remained the key contributors, suggesting home-grown price pressures are still elevated even if the pace is cooling gradually.

https://preview.redd.it/ftp8c0hly1yg1.png?width=1980&format=png&auto=webp&s=8ac3dee187a0121cf9de71a6aabed82043c4ceea

Source: ABS

The same split was visible in goods and services. Annual goods inflation accelerated sharply to 5.5% from 3.5%, while annual services inflation slowed to 3.6% from 3.9%, with rents and medical and hospital services the main contributors. Services inflation looked to have topped out prior to the Iran war, but the key question now is how quickly higher energy prices begin to spill into broader domestic pricing pressures.

That is the main caveat with this report. It captures only the early impact of the Iran war on prices, which naturally hits tradable goods first. What matters now is how long higher energy prices remain in place. The longer they persist without causing an immediate hit to demand and activity, the greater the risk the inflation pulse from tradable goods spreads elsewhere through higher inflation expectations, stronger wage demands and broader second round effects.

Softer core tempers RBA May pricing

https://preview.redd.it/sb6fcv3ny1yg1.png?width=1835&format=png&auto=webp&s=208612653f5c31eacdef9db4f37a6dd4ed97850a

Source: TradingView

On the back of the data, implied probability of an RBA rate hike in May fell marginally, according to interbank futures markets, easing from above 90% to 83%. Traders know Australia had an inflation problem before the war started, the question now is how much worse it will become in the June and September quarters. As such, beyond the high probability of a hike next week, another two are nearly fully priced by the end of the year, an outcome that would leave the cash rate at 4.85% if realised.

Mirroring the pullback in rate hike probabilities for May, AUD/USD dipped following the release of the inflation report, although it is notable the weakness was not acute by any means. That is probably because the Aussie has been more sensitive to risk appetite recently rather than rate differentials.

Risk appetite over rates

https://preview.redd.it/5acujsfoy1yg1.png?width=999&format=png&auto=webp&s=7ae8b4b3968b2a9aa704e210fe32d79ce4a00a58

Source: TradingView

As seen in the correlation matrix insert on the chart above, multiple drivers appear to be competing for influence over Aussie dollar direction right now, with AUD/USD demonstrating a modest correlation with yield differentials and risk appetite, along with a reasonable negative relationship with energy prices and USD/CNH over the past week.

However, while the correlation with the yuan has softened a touch, the link with risk appetite, as proxied by S&P 500 futures, has strengthened, suggesting it is currently the primary driver of the pair’s performance. That places just as much emphasis on earnings updates from Alphabet, Amazon, Microsoft and Meta over the next 24 hours as on the FOMC monetary policy decision.

AUD/USD nears support zone

https://preview.redd.it/0yd8t7upy1yg1.png?width=1835&format=png&auto=webp&s=2da133f6a70e7892440c6e72952e15ce60ea20b3

Source: TradingView

Despite the latest pullback, AUD/USD continues to grind higher on the H4 chart, remaining just beneath the multi-year high of .7222 set earlier this month. It now sits just above the February 2023 swing high of .7158, a level it has spent ample time around over the past fortnight.

With the oscillators pointing to waning upside strength while remaining in neutral territory, the preference remains to keep an open mind on both long and short setups, placing greater emphasis on the price action to guide direction.

On the downside, the intersection of the February 2023 high with minor uptrend support established earlier this month makes for a decent level to build setups around should the price return there. A test and bounce would allow for longs to be set with a tight stop below, targeting .7200 initially and the March high of .7222 after that.

But if the price were to break beneath the intersection and hold there, shorts could be set with a tight stop above, targeting .7120 or .7100, with .7150 a reference point located in between.

https://www.forex.com/en-us/news-and-analysis/aud-usd-outlook-inflation-shifts-rba-bets-but-tech-earnings-drive-the-aussie/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Markets expected a BOJ hold, but the detail beneath the decision was far more hawkish than the headline suggests

By :  David Scutt,  Market Analyst

• BOJ hold keeps rates steady, June still live for hike
• Three dissenters backed an immediate move to 1.0%
• BOJ says FX swings now matter more for inflation
• USD/JPY trades heavy, unable to break above 160
• Realised volatility remains historically low

BOJ Hold Masks Hawkish Shift

The Bank of Japan left policy rates unchanged at 0.75% at its April meeting, exactly as markets expected. But once you looked past the decision itself, the underlying detail was undeniably hawkish, pointing to a central bank preparing markets for a rate hike as soon as June.

Just look at the vote split, with three board members voting for an immediate hike. Nakagawa, Takata and Tamura all dissented in favour of lifting overnight rates to 1.0%.

Nakagawa said upside risks to prices were skewed higher despite uncertainty around the Middle East. Takata said the price stability target had been more or less achieved and that second-round effects from overseas price rises were already pushing risks higher. Tamura, the most hawkish BOJ member, said with upside risks becoming significantly skewed higher, rates should be as close to neutral as possible.

Three dissenters across a board of nine is important. The BOJ has seen multiple members break ranks ahead of prior tightening moves, making this a plausible sign the Bank is prepping markets for a June hike.

Softer Growth, Firmer Inflation

https://preview.redd.it/45nn9t3b5vxg1.png?width=870&format=png&auto=webp&s=7baa60669d3d58c5eba205e1f34cdc42fb82f81b

Source: BOJ

Reinforcing the hawkish signal, while the BOJ halved its median fiscal 2026 GDP growth forecast to 0.5%, reflecting the hit from the Iran war, it does not expect the slowdown to last, with median growth forecasts of 0.7% for FY27 and 0.8% for FY28. The latter two sit around the BOJ’s estimates of Japan’s potential growth rate.

Its median forecasts for CPI excluding fresh food, the BOJ’s preferred underlying inflation measure and the series tied to its 2% mandate, moved higher across the horizon. It is now seen at 2.8% in FY26, 2.3% in FY27 and 2.0% in FY28.

More importantly, core-core inflation, which strips out fresh food and energy prices and is seen as a cleaner guide on domestic price pressures, is now projected at 2.6% in FY26, 2.6% in FY27 and 2.2% in FY28.

That leaves the BOJ’s preferred underlying inflation gauge at or above target throughout the updated forecast horizon. Telling. 

The BOJ also flagged increased sensitivity to yen weakness, a notable addition to the Outlook summary at a time when many yen pairs are probing multi-decade or record highs. It said that compared with the past, fluctuations in foreign exchange rates are more likely to affect prices.

That suggests the Bank's policy deliberations may be more responsive to yen weakness than in prior cycles.

June Hike Pricing Lags BOJ Signal

https://preview.redd.it/1cchkp3d5vxg1.png?width=685&format=png&auto=webp&s=58183d85bb3f4f02961324591e6d989ee349ce67

Source: Bloomberg

Despite the hawkish undertones, swaps traders remain reluctant to move decisively towards pricing a June hike. That caution may reflect how quickly expectations for action at this meeting evaporated, with implied odds for an April move having traded above 70% earlier this month before collapsing into the decision.

Even after today’s signals, markets are pricing only around a 60% chance of a move to 1.0% in June, rising to roughly 90% by late July. More than 1.5 hikes remain priced into the curve by year-end, although that is slightly less aggressive than the path priced only a few weeks ago.

Some of the hesitation may also reflect Governor Ueda’s communication style. He has often sounded more cautious than the broader Board at key moments, and despite being given every chance over the past fortnight to cement expectations for a hike at this meeting, he stopped short. That creates an obvious risk should he strike a similar tone when he faces the media at 3:30pm Tokyo time today.

USD/JPY Heavy Below 160

https://preview.redd.it/hb5bs2se5vxg1.png?width=999&format=png&auto=webp&s=c6794e0d655eb0d844f3c0f42a4dbdc8d66d3bfd

Source: TradingView

That caution is also visible in the USD/JPY price action. 

While it remains within touching distance of the YTD high and not far from the multi-decade peak of 161.95 set in 2024, USD/JPY has traded a touch heavy in recent weeks, unable to break above the psychologically important 160 level apart from a brief foray in late March.

The threat of BOJ intervention, coupled with unwavering optimism that a lasting peace may eventually be found in the Middle East, has proven a powerful combination in an environment where the yen has been weakening against most major crosses.

Having traded above it prior to the BOJ decision, USD/JPY has now slipped back below 159.30, a level that has been repeatedly probed from both sides over the past month. It is now the immediate topside level to watch.

Below current levels, the 50-day simple moving average and March low at 157.52 should be on the radar, with the price bouncing strongly from both when last tested. The long downside wicks on moves beneath 158.50 are also notable, providing a zone for traders to watch should the price return there.

The message from the oscillators is neutral. RSI (14) has eased towards 50 while MACD is flatlining just above the signal line, holding marginally in positive territory. That places greater emphasis on price action to assess directional risks rather than maintaining a firm bullish or bearish bias.

Stepping back, what is also visually obvious is how small the pair’s moves have been recently. I ran the numbers earlier in the session, and realised 20-day volatility sits in the 10th percentile of every 20-session period going back to 1971.

It is historically very quiet, with this compression potentially paving the way for a more explosive move eventually.

https://www.forex.com/en-us/news-and-analysis/boj-hawkish-hold-pressures-japanese-yen-bears/

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.