Asian Forex Overview (May 5 - 9)

Last week brought clarity with two major elections, an interest rate decision, CPI news, and the latest U.S. employment figures.

Both Canada and Australia saw re-elections, as Prime Ministers Mark Carney and Anthony Albanese held on to power. The voters have chosen to keep the same trajectory rather than face change during Donald Trump's second term, which is proving a turbulent ground for foreign trade.

Although the latest year-over-year Australian inflation came in at 2.4%, marginally higher than expected, the Reserve Bank of Australia will likely continue on the current path of monetary easing. The government's fiscal discipline, evidenced by budget surpluses in 2023 and 2024, allows the RBA to maneuver without exacerbating inflationary pressures.

Meanwhile, the Bank of Japan has kept the interest rates steady at 0.5%. Governor Kazuo Ueda noted that the timing for underlying inflation to converge at the central bank target of 2% has been pushed back, signaling a pause in rate hikes until there is more tariff clarity. According to Reuters, Akira Otani, Goldman Sachs's managing director in Japan, pushed back the estimation for the next month to January 2026, but still keeps the target of a rate hike to 1.5%.

Next week will bring the much-needed clarification from the FED, as the market anticipates the central bank holding rates at 4.5%. On Thursday, the Bank of England will deliver its rate decision, and the market expects a 25 bps cut to 4.25%.

Key News:

• Monday: CHF- CPI, USD - ISM PMI
• Wednesday: NZD - Unemployment, USD - FOMC Rate Statement
  
• Thursday: GBP - Rate Statement, USD - Unemployment Claims
• Friday: GBP - Governor Bailey Speech, CAD - Unemployment

Pairs In Focus

1. GBP JPY

GBP/JPY has turned higher for over a month, yet the run might continue, given the pause in the Bank of Japan's hikes. Although the Bank of England is expected to cut rates, the cut is likely already priced in.

GBP JPY, daily chart, Source: TradingView

Thus, as long as this pair remains above the key weekly level of 191.900, the bullish price action might persist, with the intermediate target around 195.600—the high from late March, before the tariff-induced Yen rally. Retail sentiment is around 60% bearish, providing a contrarian opportunity.

2. EUR NZD

This pair has seen a strong rally year-to-date, yet an April spike quickly faded out, creating a possible 5-year double top scenario, with the first top in March 2020. As long as the price remains below 1.91, the odds of a deeper move lower increase.

EUR NZD daily chart, Source: TradingView

Intermediate support to watch is the consolidation from March around 1.8

Notes

• AUD/NZD: Rallied for two weeks straight. The resistance to watch above the market is 1.09.
• AUD CAD: Reversed after an early dip and rallied above the 0.88750 key level. The resistance above the market to watch is 0.89700.
• AUD/CHF: Found support around 0.52500, but has to break above 0.53450 for a sustained bullish move.
• AUD/SGD: Took out the previous week’s low but reversed. The trend is turning bullish, but it is not yet confirmed.
• AUD/JPY:  The bullish move against the yen continues, with the next significant resistance level at 95.200.
• CAD/JPY: Continued the bullish momentum, making a fresh high. Intermediate resistance to watch above is at 105.800.
• CHF JPY: Staged a strong bullish push late in the week but failed to take the April high. The key level to watch above is 176.200.
• EUR/AUD: The pair finally broke to the downside. A bearish push can be sustained if the price breaks through support, which should be around 1.74300.
• EUR JPY: The pair failed to break out of the long-term range once again. Above the market, 164.800 is the resistance to watch.
• GBP AUD: Faked out the bullish breakout before moving through the support at 2.06850. If it remains below this level, a bearish continuation is possible.
• GBP NZD: After a lower low in April, the price has now made a lower high. Thus, a continued bearish move is likely. A key level to watch below the market is 2.19.
• NZD/JPY: Advanced higher, driven by yen’s weakness. The key level to watch above is 87.350.