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AUD/USD's decline from 0.7156 resumed by breaking through 0.6563 support last week. A temporary low was formed after falling to 0.6489. Initial bias is neutral this week for some consolidations first. Upside of recovery should be limited by 0.6604 support turned resistance to bring another decline. Break of 0.6489 will target 61.8% projection of 0.7156 to 0.6563 from 0.6817 at 0.6451. Firm break there will target 100% projection at 0.6224.

In the bigger picture, rejection by 55 W EMA (now at 0.6822) keeps medium term outlook bearish. Current development suggests that down trend from 0.8006 (2021 high) is possibly still in progress. Retest of 0.6169 (2022 low) should be seen next. Firm break there will confirm down trend resumption. For now, this will remain the favored case as long as 0.6817 resistance holds.

In the long term picture, initial rejection by 55 M EMA (now at 0.7119) retains long term bearishness. That is, down trend from 1.1079 (2011 high) could still resume through 0.5506 (2020 low) on resumption.

USD/CAD's rebound from 1.3313 extended higher last week but failed to break through 1.3666 resistance. Initial bias is turned neutral this week first. Overall, price actions from 1.3976 are seen as a triangle consolidation pattern. Above 1.3666 will target 1.3860 resistance first. Firm break of 1.3860 will argue that larger up trend is ready to resume through 1.3976 high.

In the bigger picture, rise from 1.2005 (2021 low) is expected to resume through 1.3976 after consolidation from there completes. On decisive break of 1.3976, next target will be 1.4667/89 long term resistance zone. This will remain the favored case as long as 38.2% retracement of 1.2005 to 1.3976 at 1.3233 holds.

In the longer term picture, price actions from 1.4689 (2016 high) are seen as a consolidation pattern only, which might have completed at 1.2005. That is, up trend from 0.9506 (2007 low) is expected to resume at a later stage. This will remain the favored case as 55 M EMA (now at 1.3031) holds.

GBP/JPY's up trend continued last week and outlook is unchanged. Initial bias stays on the upside this week. Next target is 100% projection of 148.93 to 172.11 from 155.33 at 178.51. Nevertheless, break of 171.26 minor support will delay the bullish case, and turn bias to the downside for deeper retreat.

In the bigger picture, up trend from 123.94 (2020 low) is extending. Next target will be 161.8% projection of 122.75 (2016 low) to 156.59 (2018 high) from 123.94 at 178.69. For now, medium term outlook will remain bullish as long as 155.33 support holds, even in case of deep pull back.

In the longer term picture, as long as 55 M EMA (now at 154.52) holds, rise from 122.75 (2016 low) could still extend higher at a later stage to 195.86 (2015 high).

EUR/JPY's rise from 146.12 continued last week and outlook is unchanged. Initial bias stays on the upside this week for 151.60 resistance. Firm break there will resume larger up trend to 153.64 projection level. On the downside, however, break of 148.83 will extend the corrective pattern from 151.60 with another falling leg, back towards 146.12 support.

In the bigger picture, rise from 114.42 (2020 low) is in progress. Next target is 61.8% projection of 124.37 to 148.38 from 138.81 at 153.64. Sustained break there will pave the way to 100% projection at 162.82. For now, medium term outlook will remain bullish as long as 139.05 support holds, even in case of deep pull back.

In the long term picture, break of 149.76 (2014 high) argues that whole up trend form 94.11 (2012 low) is resuming. Sustained trading above 149.76 will pave the way to 100% projection of 94.11 to 149.76 from 109.03 at 164.68, which is close to 169.96 (2008 high).

EUR/GBP had been losing downside momentum last week, but there is no sign of bottoming. Further fall is expected this week as long as 0.8717 resistance holds. Current fall from 0.8977 should target 100% projection of 0.8977 to 0.8717 from 0.8874 at 0.8614. On the upside, however, break of 0.8717 will indicate short term bottoming, and turn bias back to the upside for stronger rebound.

In the bigger picture, current development argues that whole decline from 0.9267 (2022 high) is still in progress. This is part of the long term range pattern from 0.9499 (2020 high). Deeper fall would be seen through 0.8545 support. This will now remain the favored case as long as 0.8874 resistance holds.

In the long term picture, long term range pattern is extending. But rise from 0.6935 (2015 low) is expected to extend at a later stage, to 0.9799 (2009 high).

EUR/AUD's rebound from 1.6134 extended higher last week and the development argues that correction from 1.6785 has completed, after drawing support from 55 D EMA. Further rise is expected this week as long as 1.6356 minor support holds, to retest 1.6785 high. On the downside, however, break of 1.6309 minor support will dampen this view and turn bias back to the downside for 1.6134 support again.

In the bigger picture, whole down trend from 1.9799 (2020 high) should have completed at 1.4281 (2022 low). Further rise should be seen to 61.8% retracement of 1.9799 to 1.4281 at 1.7691 next. For now, outlook will stay bullish as long as 1.5976 resistance turned support holds, even in case of deep pull back.

In the longer term picture, it's still early to decide if rise from 1.4281 is resuming whole up trend from 1.1602 (2012 low). Attention will be paid on the structure on the current rally to make an assessment later.

EUR/CHF dipped further to 0.9675 last week, but turned sideway just ahead of 61.8% retracement of 0.9407 to 1.0095 at 0.9670. Initial bias remains neutral this week first. Strong support should still be seen around 0.9670 to complete the whole corrective pattern from 1.0095. On the upside, firm break of 0.9760 resistance will confirm short term bottoming, and turn bias back to the upside for 0.9878 resistance next. However, sustained break of 0.9670 will pave the way back to 0.9407 low instead.

In the bigger picture, prior rejection by 38.2% retracement of 1.1149 to 0.9407 at 1.0072 suggests that medium term outlook is staying bearish. The pair is also capped below 55 W EMA (now at 0.9945). Down trend from 1.2004 (2018 high) is not completed yet and is in favor to resume through 0.9407 at a later stage. However, decisive break of 1.0095 resistance will raise the chance of bullish trend reversal. Rise from 0.9407 should then target 1.0505 cluster resistance (2020 low at 1.0505, 61.8% retracement of 1.1149 to 0.9407 at 1.1484).

In the long term picture, it's still way too early too call for bullish trend reversal with upside capped well below 55 M EMA (now at 1.0515) and 1.0505 support turned resistance (2020 low). The multi-decade down trend could still continue.

Last week saw the US Dollar dominating the currency markets, with a surprising rally buoyed by market sentiments flipping in favor of an imminent Fed rate hike in June. An atmosphere of growing optimism pervaded the scene, buoyed by increasing confidence in a forthcoming agreement on raising the US debt ceiling, thus staving off a looming government default.

The greenback's impressive stride was synchronized with an appreciable leap in treasury yields. An intriguing development was the apparent decoupling of Dollar's inverse performance from risk markets, as exemplified by NASDAQ's robust gains. It is now speculated that Dollar might maintain this trajectory of reduced sensitivity to risk sentiment in the near future.

Within the foreign exchange market, the New Zealand dollar trailed at the back of the pack. 'Kiwi' took a hit following what was perceived as a dovish rate hike by RBNZ. Australian Dollar, hampered perhaps by market pessimism over a waning Chinese recovery, was the second-worst performer. Yen also languished, buckling under the pressure of escalating global benchmark yields.

European majors, despite losing ground to the dollar, held their own against other currencies. Notably, the Swiss Franc and Euro managed to outpace the Sterling, if only just. These developments serve as a reminder of the capricious nature of the currency markets, where fortunes can shift rapidly based on global economic dynamics.

Markets now sees 64% chance of another Fed hike in Jun

There was an unexpected and drastic U-turn in market expectations for Fed's June meeting. Fed funds futures are now pricing in 64.2% chance of another 25bps hike to 5.25-5.50% on June 14, with 35.8% chance of a odd. A week ago, there was just 17.4% chance of a hike with an overwhelming 82.6% chance of a hold.

The set of strong set release on Friday was a key driver of the change in sentiment. Both headline and core PCE inflation accelerated again in April, to 4.4% yoy and 4.7% yoy respectively. At the same, time, personal spending had robust growth of 0.8% mom, arguing that consumers might have well adapted themselves to the high inflation environment.

In the mean time, IMF also said in a statement: "To bring inflation firmly back to target will require an extended period of tight monetary policy, with the federal funds rate remaining at 5¼–5½ percent until late in 2024."

There are still more than two weeks to go before the next FOMC meeting. Theoretically, there is still lots of room for the picture to change. But markets reactions to upcoming US data, like non-farm payroll report on June 2 and CPI on June 13, could be asymmetric, and be more sensitive to the hawkish side.

Dollar index extending near term rise towards 106

Dollar index extended the rebound from 100.78 short term bottom as expected, to close at 104.20. The rally was driven by both Fed expectations and surging treasury yields. Meanwhile, the greenback has continued to engage in on-off inverse relationship with risk sentiment.

For now, further rally is expected as long as 55 D EMA (now at 102.73) holds, towards 105.88 resistance, and 38.2% retracement of 114.77 to 100.82 at 106.14. Based on current development this target zone could be reached within June.

However, it should be noted that DXY is still seen as in a three-wave corrective pattern from 100.82. Hence, strong resistance could emerge at 105.88/106.14) to complete the rebound. Or, sustained break of 106.14 will argue that it's already in a bullish trend reversal, which would set the tone for an up trend in H2.

10-year yield in progress for 4.091 resistance next

10-year yield's rally from 3.253 extended higher to close at 3.810 last week. For the near term, further rise is expected as long as 55 D EMA (now at 3.576) holds. The primary question now is whether correction from 4.333 has completed in a three-wave pattern to 3.253. Firm break of 4.091 resistance would boost the bullish case, targeting 4.333.

It's too early to be confident about an upcoming bullish development. But TNX had drawn strong support from rising 55 W EMA (now at 3.312). Thus, the up trend from 0.398 is intact. Firm break of 4.333 would resume the up trend to 61.8% projection of 1.343 to 4.333 from 3.253 at 5.100.

Should this scenario unfold, it's likely that DXY could also break through the aforementioned 106 resistance level, confirming a bullish trend reversal.

NASDAQ surged again as AI rally continued

US stocks concluded the week on a high note as traders harbored hopes an agreement would be reached to raise US debt ceiling, thereby averting a potentially disastrous default. The strong rally towards the week's end suggests that investors were not unduly concerned by potential further interest rate hikes from Fed in June.

NASDAQ, the standout performer, registered its fifth consecutive weekly gain, rising by 2.5%, as the rally in AI continued unabated. The spotlight was undoubtedly on chipmaker Nvidia, which reported an extraordinary earnings performance and its leading position in AI technology. However, other tech giants such as Microsoft, Meta, and Alphabet also made their share of gains, each showcasing their individual contributions to the burgeoning AI narrative.

NASDAQ is now quickly approaching a key clusters resistance zone at 13150/81, 13181.08, 50% retracement of 16212.22 to 10088.82 at 13150.52, and 100% projection of 10088.82 to 12269.55 from 10982.80 at 13163.53.

Rejection by this resistance zone will keep the down trend from 16212.22 intact. However, sustained break there will suggest that the trend has already reversed. Next target is 161.8% projection at 14511.22.

GBP/JPY extending up trend towards 178/180 zone

Yen's development is also a highlight for the near term in addition to Dollar. BoJ Governor Kazuo Ueda threw out the idea of tweaking YCC to target 5-year JGB yields. But that was largely ignored by the markets. After all, the central bank is still not expected to really exit its massive stimulus any time soon. Nikkei is also staying strong, which reinforces its trend with Yen's selloff.

GBP/JPY's up trend finally took off late last week, as UK CPI data suggested that BoE would likely have no change but to tighten again in June. From a near term point of view, further rally is expected as long as 171.26 support holds. Next target is 100% projection of 148.93 to 172.11 from 155.33 at 178.51.

From a medium term point of view, it's now extending the up trend from 123.94. Next target will be 161.8% projection of 122.75 (2016 low) to 156.59 (2018 high) from 123.94 at 178.69.

That is, there might be strong resistance around 178/180 to limit upside. But let's see if the cross could pick up momentum from now on.

AUD/USD Weekly Report

AUD/USD's decline from 0.7156 resumed by breaking through 0.6563 support last week. A temporary low was formed after falling to 0.6489. Initial bias is neutral this week for some consolidations first. Upside of recovery should be limited by 0.6604 support turned resistance to bring another decline. Break of 0.6489 will target 61.8% projection of 0.7156 to 0.6563 from 0.6817 at 0.6451. Firm break there will target 100% projection at 0.6224.

In the bigger picture, rejection by 55 W EMA (now at 0.6822) keeps medium term outlook bearish. Current development suggests that down trend from 0.8006 (2021 high) is possibly still in progress. Retest of 0.6169 (2022 low) should be seen next. Firm break there will confirm down trend resumption. For now, this will remain the favored case as long as 0.6817 resistance holds.

In the long term picture, initial rejection by 55 M EMA (now at 0.7119) retains long term bearishness. That is, down trend from 1.1079 (2011 high) could still resume through 0.5506 (2020 low) on resumption.

The USDJPY bumped against the technically important 140.00 handle, and the Japanese government took notice. Both BOJ Governor Ueda and Finance Minister Suzuki addressed the yen, and it has retraced a bit. Does this mean the BOJ could be looking at a policy change?

What happened?

Japan policy makers have had both good and bad news recently. The Nikkei blue chip stock index has returned to highs not seen since 1990 thanks to better results from Japanese firms. Exporters in particular were doing well, as the weaker yen since last year has boosted competitiveness. This increased activity helped boost the country's GDP, which led to hopes that Japan could finally be getting out of its multi-decade slump of lethargic growth and low inflation.

In that context, the BOJ has been hesitant to step away from its ultra-easing policy. Inflation has risen dramatically in the country, doubling the central bank's target. But, that was seen primarily driven by the weaker yen, raising costs for imported goods. In particular, food and energy. The BOJ wants so-called "dynamic" inflation, driven by increased economic activity, which still hasn't consolidated.

You get what you ask for

BOJ governor Ueda's insistence on sticking to the ultra low policy has contributed to the yen weakening against other currencies. Carry trading (selling yen to buy commodity currencies, for example) has returned to increased popularity as other central banks raise rates. The yen had strengthened late last year on speculation that the BOJ could start tightening. Under former ultra-dove Kuroda, it widened the YCC, which in practice caused some tightening. There was rampant speculation that the new governor meant that tightening would be back on the table.

But, as time has gone on, Ueda's insistence on not revising YCC - the first step towards tightening - has progressively convinced more traders that he actually means it. There would not be more tightening, so bets have come back on a weaker yen. Last year, the yen went all the way to 150 before the Ministry of Finance stepped in to do something about it.

Now what?

With the pair hitting 140, it appears that the Ministry of Finance has taken notice, and Minister Suzuki yesterday said he would be watching the exchange rate. That doesn't mean action is imminent, but it clearly was meant to send a message to the markets that the government wouldn't be allowing another depreciation run like last year.

Since a weak yen has monetary policy implications, Ueda finally weighed in. Without making reference to the exchange rate, he said that tweaks could be made to YCC. Previously he had been insistent that nothing would change until the review was over. He went on to clarify that this didn't mean any change would happen, refusing to comment on how likely it was. But it was a clear change in tone, suggesting that while the BOJ is happy to keep easing to support the economy, it won't tolerate another bout of weakness in the yen. 140 might be consolidated as something of a policy floor.

The question now is how committed will the BOJ be in defending the yen, so yen traders might want to pay extra attention to how much bond buying the BOJ does in the coming days.

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