The dollar exhibits a slight depreciation, yet remains confined within established trading ranges. The dollar continues to gradually weaken against the Chinese yuan. Today, the offshore yuan reached a new three-year low, despite the PBOC adjusting the dollar’s fix marginally upward. Meanwhile, the greenback is trading in a narrow range near yesterday’s high against the Japanese yen, which is the highest it has been since the April 30 intervention. The euro reached its session low yesterday during early North American trading, just above $1.1605, seemingly in reaction to news reports indicating that Tehran would cease communication with the US due to Israel’s military actions in Lebanon. Following the establishment of the low, the euro rebounded to nearly $1.1640. It remains in a state of subdued trading today, currently oscillating within a range of approximately $1.1630 to $1.1655. The intraday momentum indicators suggest a potential extension of the upside range in North America.

The dollar reached JPY159.75 in North America yesterday, its best level against the yen since the April 30 intervention and is approaching this level in the European morning. It has not dipped below JPY159.60 today. The dollar has maintained its position above JPY159 for the fifth consecutive session. Since the intervention on April 30, the dollar has appreciated in 18 out of the 22 sessions. Finance Minister Katayama cautioned at the conclusion of the previous week that intervention to address volatility or speculative actions remains a viable option. One-month implied volatility declined to levels not seen in four years before the weekend, approaching 6.1%. Prior to the intervention on April 30, the figure stood at approximately 7.5%. Similarly, three-month implied volatility declined to nearly 7% before the weekend, a level not observed in four years.

In the realm of speculative positioning, the Commitment of Traders report indicates that non-commercials have accumulated the most substantial short yen position since 2007, totalling 227.6k contracts, with each contract valued at JPY12.5 million, amounting to a cumulative approximately $17.83 billion as of May 26. Options for 1.6 billion at JPY 160 expire today. According to Bloomberg, sterling traded 1/100 of a cent below last Friday’s low. It maintained a position above $1.3405 and rebounded to near the session peak of $1.3475 by early in the New York afternoon. It briefly rose above $1.3480 today and maintained a position above $1.3450. Our analysis of the technical indicators continues to suggest a favourable outlook for upward movement. Initial resistance is in the range of $1.3480 to $1.3500.

The dollar-bloc currencies experienced a decline yesterday, with the Canadian dollar depreciating by approximately 0.25%. The greenback appreciated to nearly CAD1.3850 yesterday, continuing the recovery observed prior to the weekend. It has approached nearly CAD1.3855 today. Last week’s peak, coinciding with May’s maximum, approached CAD1.3870. With a few exceptions on an intraday basis, the Australian dollar has maintained a trading range between 0.7100 and 0.7200 since mid-May. Only a breach of this range holds significance. Here, our evaluation of the technical condition suggests a favourable outlook for an upward breakout. It has reached nearly $0.7190 today, where options for A$370 million expire today.