One of the biggest imbalances in the global economy is that Euro is too strong. Our fair value for EUR/$ is below parity, as EUR/$ at 1.20 (blue) maps into a higher broad trade-weighted Euro (black) than in the past. How is the Euro zone supposed to reflate in this strangle hold?


USDJPY fails on the break above 2021 high

March 31 high comes in at 110.96

The USDJPY moved to a new high for 2021 earlier today after breaking above the March 31 high of 110.96. The high price today reached 111.099.
March 31 high comes in at 110.96
Looking at the hourly chart below, the move above the March 31 high at 110.96 lasted for about an hour or so before failing and moving back to the downside. The corrective high price since the break lower reached 110.909 – about 5 pips below that old high.  The current price is trading around 110.734. That takes the price below the June 17 high of 110.818.

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USDJPY up through 111.00

JPY weakness

The JPY weakness helping push USDJPY up through 111.00 and US 10 year yields snugged up to 1.50%. The next major test is up at 111.50 with some heavy daily resistance clustering up there.  US strength should remain heading into Friday on expectations of more inflationary signs from the US PCE deflator.

JPY weakness

JPY strongest against the USD

JPY strength continues

The JPY remains the strongest currency on the day following on from last weeks strength as positions in the GBP, EUR, and CAD were unwound against the JPY.
JPY strength continues

The AUD, and NZD also showing signs of strength, so not a classic risk off market despite the lower yields and equity futures markets.

FX option expiries for 16 June 10am New York cut

A look at what is on the board for today


Just a couple of ones to take note of, as highlighted in bold.
The chunk in EUR/USD around 1.2115-30 is likely to keep price action rangebound before they roll off, adding to the lull ahead of the FOMC meeting later in the day.
Besides that, there is some attraction for USD/JPY closer towards 110.00 in the days ahead with the expiries today likely to support things going into North American trading.
Elsewhere, there is also still some decent expiries seen for AUD/USD around 0.7700 and 0.7750 so that could keep price action more sticky in the days ahead as well.
That said, a lot depends on the reaction to the Fed so there’s that to consider.

Dollar having a bit of a mixed showing so far on the day

A mixed session so far for the greenback

The dollar is trimming losses slightly against the euro and franc but is still keeping lower against both currencies, and is now grinding a slight advance against the rest of the major currencies bloc in European morning trade.


GBP/USD has eased a little back under 1.4100 though key support is still seen closer around 1.4073-86 while AUD/USD has also slipped just below 0.7700 for now:
AUD/USD H1 15-06
The latter is testing the lows from Friday but in the context of the past few weeks, none of these moves are really breaking out of range to be fair.
USD/CAD is also up a little to 1.2165 with minor resistance seen closer to 1.2170-77 before further resistance is seen at 1.2200.
I wouldn’t look too much into any of these moves for the time being unless they start to chip away at key technical levels. The FOMC meeting tomorrow still holds all the cards.

PBOC sets USD/ CNY reference rate for today at 6.3972 (vs. yesterday at 6.3956)

The People’s Bank of China set the onshore yuan (CNY) reference rate for the trading session ahead.

    • USD/CNY is permitted to trade plus or minus 2% from this daily reference rate.
    • CNH is the offshore yuan. USD/CNH has no restrictions on its trading range.


  • The previous close was 6.3865
  • Reuters estimate from their survey was 6.3971, Bloomberg 6.3967  …. (A rate that’s significantly stronger or weaker than expected is typically considered a signal from the PBOC).

Here’s a restrained view on the Chinese yuan – more two-way trading, not a sharp downtrend

HSBC with a restrained view for RMB, looking for its appreciation to slow and prompt some range trading, not a sharp reversal.

  • We believe the recent comments and countercyclical measures out of China … suggest that, while there is no line in the sand, there is still a policy preference for basic stability of the RMB exchange rate.
  • We do not believe the recent downward momentum is the beginning of a long-term RMB appreciation trend. Cyclical indicators are pointing to a likely slowdown of GDP growth and smaller yield advantage for China in 2H21. We expect these cyclical developments to see net FX flows to China moderating in 2H21.
  • Broad USD weakness may be tested, if the Federal Reserve’s tapering debate picks up later in the year and some of the generous USD liquidity conditions could subside later this year. Our economists expect an official tapering announcement at the end of the year and implementation in 2022.
  • We think that China’s broad FX framework has not changed, namely two-way capital account liberalisation is maintained with the aim of achieving a balanced flow. Our base case sees USD/RMB exhibiting more two-way movement and then rise slightly later this year, when China’s outbound investment liberalisation accelerates, likely in 2H21.
(I bolded those Fed comments from HSBC that were part of the yuan note).
Weekly offshore yuan (USD/CNH) candles showing the appreciation trend for yuan  since the middle of last year.
HSBC RMB usd.cnh yuan

CFTC commitments of traders: EUR longs increased. CAD longs increase

Weekly futures forex positioning data from the CFTC

  • EUR long 109K vs 104K long last week. Longs increased by 5K
  • GBP long 24K vs 31K long last week. Longs trimmed by 7K
  • JPY short 47K vs 50K short last week. Shorts trimmed by 3K
  • CHF short 0K vs 1K short last week. Shorts trimmed by 1K
  • AUD short 2K vs 1K short last week. Shorts increased by 1K
  • NZD long 6K vs 8K long last week. Shorts trimmed by 2K
  • CAD long 49K vs 45K long last week. Longs increased by 4K


  • EUR longs remain the biggest position and moved further away from the 100K level with a 5K increase
  • CAD longs at 49K is the next largest long position
  • JPY is the only meaningful short position at -47K
  • GBP longs were trimmed as the pair approaches the midpoint of the trading range since 2014 near 1.4300.