JPY lower on rising bond yields, overnight CPI miss

The G-10 rundown

USD – the USD rally a bit sidelined for now, but in no mortal danger just yet as we watch the recent cycle lows in GBPUSD (very pivotal Fibonacci level at recent low) in EURUSD and the 111.00 area in USDJPY for further progress.

EUR – the single currency surviving the slings and arrows of outrageous Italian politics with surprising aplomb, but is the resilience justified? We are surprised how little the latest IMM report showed US speculative long euro positioning in future unwinding – interesting to see today’s report as there is plenty of fuel for further euro downside from general position unwinding.

JPY – the yen in a very bad place with strong/stable risk appetite, higher oil prices, and higher bond yields. As long as all three of these remain in place, yen could win the race to the bottom, though eventually we suspect risk appetite could be the first to crack if all three continue rising.

GBP – pulling our our Fibo yardstick, we note that while the 1.3500 area in general looks pivotal, the actual recent low near 1.3465 was an exact test of the 38.2% Fibo of the entire rally sequence off the 1.2000 area to the 1.43+ high. A failure of this level could lead to a test of the next major Fibo around 1.2900.

CHF – yawn... USDCHF parity magnet in place as EURUSD has stopped falling at the moment. The EURCHF 1.1800 area looks pivotal and will likely move up or down in synch with any notable shift in EU existential fears, whether to the positive or negative side.

AUD – AUDUSD consolidating in a narrow range and the chart structure remains bearish as long as it remains below 0.7600-50.

CAD – As indicated above, USDCAD is set for a directional move soon before month-end as today’s data sets up expectations for the May 30 Bank of Canada meeting and the reaction to it.

NZD – kiwi clawing back some of the losses versus the AUD, with the first support for AUDNZD at the 200-day moving average around 1.0885, but the support for the break sequence higher down in the key 1.0800-50 pivot zone.

SEK – the 10.25-30 area has developed as the local pivot zone as the market has to decide whether the SEK repricing whould be taken back toward the bigger 10.00 area. The SEK rally may not have much more fuel in the tank, most of which has been driven by an unwind in crowded short SEK positioning in our view.

NOK – we give up on NOK as the last couple of days of action have whipsawed the chart. The overarching conclusion is that it is highly disappointing that very strong oil prices have failed to support the NOK more against a struggling euro, and that short Norwegian rates near multi-month lows offer no support either.

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