The US dollar is predominantly stronger, although the Australian and New Zealand dollars are showing resilience against this trend. The euro is currently fluctuating within a range of approximately 15 ticks around $1.16. Meanwhile, despite a rally in Gilts driven by lower-than-anticipated inflation figures, sterling is finding it challenging to regain the $1.34 level. The yen has experienced a decline over the past seven sessions and currently remains relatively stable, fluctuating within a narrow range around JPY159. There has not been intervention; however, the market is aware that it presents a temptation for officials. At the same time, the tenuous ceasefire in Iran may conclude in the coming days, leaving investors in a state of heightened anxiety. Oil prices are experiencing a decline following reports that three supertankers have successfully navigated the Strait of Hormuz today. The preliminary May PMI surveys are set to be released tomorrow, anticipated to reflect the ongoing disruptions caused by the war on both pricing and economic activity. The minutes from Powell’s last FOMC meeting as chair are due today and are expected to reflect a greater inclination towards a neutral stance than the three dissents suggest. After the markets close today, Nvidia is set to report its earnings.

Following the short-covering rally on Monday, which lost momentum, the euro’s downward trajectory continued yesterday. The single currency declined to nearly $1.1590, marking its lowest point since April 8. Today, it has approached the 61.8% retracement of the rally from the year’s low on March 16, approximately $1.1410, located near $1.1580. The positioning of the momentum indicators suggests a heightened risk of further downside, potentially extending toward the range of $1.1515-25 next. It has not traded above 1.1615 today. Throughout the 13 sessions this month, the yen experienced depreciation in all but two instances, including a consecutive seven-day decline leading up to today. In the 13 sessions leading up to the April 30 intervention by the Bank of Japan, the yen experienced depreciation in 10 of those sessions. One-month implied volatility concluded just under 7.4% yesterday, remaining essentially unchanged since the day prior to the April 30 intervention.

Monday’s potentially bullish key reversal did not lead to follow-through gains yesterday. In fact, sterling retraced half of yesterday’s gain from nearly $1.33, marking its lowest point since April 8. Sterling has remained within a limited range today, fluctuating between approximately $1.3375 and $1.3405. A break of $1.3360 indicates a potential retest of Monday’s low. Softer than anticipated inflation contributed to the greenback’s ability to bolster its position against the Canadian dollar, reaching nearly CAD1.3775. It marked the US dollar’s ninth increase in ten sessions. The greenback has edged up to almost CAD1.3780. We have indicated potential in the CAD1.3800-15 range. Initial support now stands at approximately CAD1.3740.

The Australian dollar was traded at $0.7080 yesterday, marking its lowest point since April 14. It halted just before reaching the $0.7055 level, which aligns with the midpoint of the Australian dollar’s ascent from the low observed on March 30 (approximately $0.6835). The momentum indicators have only recently turned down, providing ample opportunity for further declines. Moreover, the five-day moving average has crossed below the 20-day moving average for the first time in over a month. It is trading quietly in the lower end of yesterday’s range, maintaining a position below approximately 0.7115 and above 0.7085.