Forex today: thin markets, dollar catches modest bid, Iran focused, traders await key Asian data

Forex today was a slow burner due to the UK bank holiday. However, there was movement and the greenback climbed modestly across the board of the G10's. Also, to note, the price of a barrel of oil climbed through the psychological $70 level where US driving season and the potential US-imposed sanctions on Iran have driven prices higher - Trump tweeted that there will be an announcement over Iran at 2pm Tuesday NY time.

The US 10yrs were little changed around 2.95%, (2.93%-2.96% range ) and same went for the 2yr yields around 2.50%. The Fed fund futures yields continued to factor in a rate hike in June and an additional one by year-end. The DXY traded between a 92.4480-92.9740 range.

As for other currencies, the single unit settled into a consolidation in NY trade after reaching a fresh low down below the 1.19 handle at 1.1897 on the back of weak German and EZ data. The pair picked up to 1.1937 the high after an open of 1.1920 in NY and then drifted into a close of 1.1921. 

GBP/USD rallied from 1.3516 lows early doors and made a high of 1.3575, closing the day at 1.3565 while London was closed for the May bank holidays. For the week ahead, UK manufacturing and the BoE will be the highlights with eyes on the 10-D SMA as an upside target. However, there is the case for further downside, especially on a dovish/bearish outcome from the MPC this week.

As for the cross, the pound leg was propelled on the back of the drop below the 1.19 handle in EUR/USD. EUR/GBP fell to 0.8778 from 0.8842 Asian session highs before catching a bid back to the 10-hr SMA at 0.8791 for the close.

USD/JPY was pressured from 109.40 down to a test of the figure before settling for a close of 109.08. The pair has crept higher from the 100-D SMA but struggles at the Tenkan at 109.35 that meets the 100-hr SMA, although yesterday's BoJ minutes keep the pair on the front foot and there are fewer chances of a test down to the Kijun & cloud 107.85/89. (Note: the 61.8% fibo of 106.62-110.05 located at 107.95). Traders await the US CPI and stay with the BoJ/Fed divergence for the time being. As for the commodity complex/FX, oil was the theme, piercing the psychological $70 handle, however, AUD/USD was capped just below the 10-D SMA at 0.7541 having trade within a range of 0.7493 and 0.7530. 

Key notes from US session:

Fundawrap: geopolitics back in vogue, oil above $70 is significant

Key events ahead:

Analysts at Westpac offered their outlook for today's key events as follows:

"At 11:30am Syd/9:30am Sing/HK we see Australia Mar retail sales. 

Australia’s 2018/19 federal budget is delivered at approximately 7:30pm Syd/5:30pm Sing/HK.

Markets tend not to respond very much to its delivery but it will be the dominant story in Australian media and some of the details are of market interest. Overall, we expect a growth-supportive budget, consistent with improved revenues and an election due inside 12 months. Guidance from the government plus media reports indicate the announcement of limited personal income tax cuts and additional infrastructure spending but a projected surplus in 2019/20, a year earlier than previously forecast. The government is also committed to passing the tax cuts for larger businesses that were announced last year but did not pass the Senate. At the margin, the RBA could see the budget as one factor helping the economy reach its 3.25% growth forecasts in 2018 and 2019.

At 1pm Syd/11am Sing/HK, the RBNZ releases its survey of inflation expectations, which occasionally moves the kiwi. The Q1 outcome was 2.11%yr.

China April trade data is due after 12pm Syd/10am local. The report has been even more volatile than usual lately, including the trade balance collapsing from $33bn surplus in Feb to -$5bn deficit in March. A return to a large surplus is expected.

Fed chairman Powell speaks in Zurich on monetary policy and international capital flows from 5:15pm Syd/3:15pm Sing/HK. President Trump announces his decision on the Iran nuclear deal at 2pm NY time. The US data calendar is limited to the Apr NFIB small business survey, which should remain upbeat, and March data on job openings, quit rates etc (JOLTS)."