low volatility

No macro data scheduled for release on Tuesday. Only relatively unimportant reports on retail sales in the European Union and the Construction PMI in the UK can be highlighted.     However, it should be noted that the Construction PMI will be released in its second estimate, so there is practically no chance of a market reaction. Only if the actual value deviates significantly from the forecast, which rarely happens in second estimates. As for the retail sales report, it is not a particularly important one. If there is any reaction, it will be minimal.     There are no scheduled fundamental events for Tuesday, not even ones that are of secondary importance. Both currency pairs are currently in a suspended state as it is not entirely clear which direction they will move in this week. In the medium term, both pairs are expected to resume their decline, while in the short term, the downtrends have been broken, making a rise more likely. The fundamental and macroeconomic backdrop this week is very weak, so the movements can be weak and non-trending.     General conclusions: There will be hardly any important events on Tuesday, so we expect low volatility and weak intraday trend movements. There is a minimal probability that the market will react to the two reports mentioned earlier, but it is indeed very weak. It is unlikely that we will get an answer about the current trend in the market by Tuesday.   Basic trading rules: 1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal. 2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored. 3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading. 4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually. 5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel. 6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.   How to read charts: Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them. Red lines are channels or trend lines that display the current trend and show which direction is better to trade. MACD indicator (14,22,3) is a histogram and a signal line showing when it is better to enter the market when they cross. This indicator is better to be used in combination with trend channels or trend lines. Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair. Therefore, during such events, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement. Beginners should remember that every trade cannot be profitable. The development of a reliable strategy and money management are the key to success in trading over a long period of time.  

What events may affect market sentiment on June 7? Analysis of fundamental data for beginners. On Wednesday, there will be very few macroeconomic reports. We can mention the US balance of trade report, but I can't even remember the last time this report provoked any market reaction. Therefore, we should probably expect the market to go into a "half-holiday" state again today. Volatility could range from 50 to 70 pips for both instruments, which makes it challenging to trade.   But there's nothing we can do if there are no news and reports, the market has no reason to be active. Analysis of fundamental events: Among the fundamental events, the only notable one is the speech by European Central Bank Vice President Luis de Guindos. As we approach the June ECB meeting, his comments may help traders understand the central bank's plans for this month. However, traders are already aware of these things.   The probability of a new quarter point rate hike is 100%, and there are simply no other options. Therefore, even if de Guindos hints at further tightening, it will not support the euro or create pressure on it. It would be different if de Guindos outlines the future prospects for the ECB rate, as there has been recent information suggesting that the June hike may be the last in the tightening cycle. But for now, it's only rumors.     General conclusions: On Wednesday, there will be hardly any significant events, so we expect low volatility and weak intraday movements. Theoretically, de Guindos' speech could turn out to be interesting, but in reality, we have witnessed a large number of speeches by ECB committee members in the last two weeks. It is unlikely that de Guindos will reveal anything fundamentally new today.     Basic trading rules: 1) The strength of the signal depends on the time period during which the signal was formed (a rebound or a break). The shorter this period, the stronger the signal. 2) If two or more trades were opened at some level following false signals, i.e. those signals that did not lead the price to Take Profit level or the nearest target levels, then any consequent signals near this level should be ignored. 3) During the flat trend, any currency pair may form a lot of false signals or do not produce any signals at all. In any case, the flat trend is not the best condition for trading. 4) Trades are opened in the time period between the beginning of the European session and until the middle of the American one when all deals should be closed manually. 5) We can pay attention to the MACD signals in the 30M time frame only if there is good volatility and a definite trend confirmed by a trend line or a trend channel. 6) If two key levels are too close to each other (about 5-15 pips), then this is a support or resistance area.   How to read charts: Support and Resistance price levels can serve as targets when buying or selling. You can place Take Profit levels near them. Red lines are channels or trend lines that display the current trend and show which direction is better to trade. MACD indicator (14,22,3) is a histogram and a signal line showing when it is better to enter the market when they cross. This indicator is better to be used in combination with trend channels or trend lines. Important speeches and reports that are always reflected in the economic calendars can greatly influence the movement of a currency pair.   Therefore, during such events, it is recommended to trade as carefully as possible or exit the market in order to avoid a sharp price reversal against the previous movement. Beginners should remember that every trade cannot be profitable. The development of a reliable strategy and money management are the key to success in trading over a long period of time.    

GBP/USD also traded lower on Tuesday, and if you look at the events calendar you would see that the pair had no reason to fall. However, as we have mentioned before, just because the events calendar is empty, it does not mean that the pair will simply stay still. The pound's decline was and remains the most likely scenario, so a 50-60 point decline is not out of the ordinary.   The only report of the day, the UK Construction PMI, turned out to be slightly better than forecasts but, as we can see, had no impact on the pair's movement. On the technical side, however, the pair performed quite well, staying precisely between the Senkou Span B and the Kijun-sen lines. The signals for the pound were almost identical to the signals for the euro, with the only difference being that at the beginning of the European trading session, the pair managed to form a false buy signal by consolidating above a critical line.   This signal resulted in a small loss, but was followed by a good sell signal near the same Kijun-sen line, after which the pair fell to the Senkou Span B line. It was appropriate to close shorts near this line so you could gain around 35 pips of profit. Bouncing off the lower boundary of the Ichimoku cloud was also a good signal, and a long position allowed traders to gain about 20 pips. Thus, despite the initial losing trade, the day ended with a profit. Due to the low volatility, the profit was also relatively small.     COT report: According to the latest report, non-commercial traders opened 1,100 long positions and closed 500 short ones. The net position increased by 600 and remained bullish. Over the past 9-10 months, the net position has been on the rise despite bearish sentiment. The pound is bullish against the greenback in the medium term, but there have been hardly any reasons for that. We assume that a prolonged bear run has begun. COT reports suggest a bullish continuation. However, we can hardly explain why the uptrend should go on.   Both major pairs are in correlation now. At the same time, the positive net position on EUR/USD shows the end of the uptrend. Meanwhile, the net position on GBP/USD is neutral. The pound has gained about 2,300 pips. Therefore, a bearish correction is now needed. Otherwise, a bullish continuation would make no sense even despite the lack of support from fundamental factors. Overall, non-commercial traders hold 57,000 sell positions and 70,300 long ones. We do not see the pair extending growth in the long term. x

The EUR/USD pair has been going through low volatility and volume. The chart above may suggest that the pair moved quite actively, but in reality, there was only a 53-pip range between the day's high and low. Thus, we have witnessed the third consecutive boring and uninteresting day. Yesterday's only notable report was the number of approved construction permits in the United States. The report turned out slightly better than expected, which helped strengthen the dollar to some extent. But what kind of reaction are we talking about?   A mere 20 pips, which is not interesting at all and does not affect the current technical picture. The pair continues to correct sluggishly downward against an empty calendar. Yesterday, one signal was even formed. During the European trading session, the pair rebounded from the level of 1.0943 and then moved down by the aforementioned 50 pips. However, the price could not reach the target level by the end of the day, and no further signals were formed. Therefore, it was advisable to manually close the sell trade anywhere closer to the evening. It was possible to earn around 30 pips from it, which is not bad considering the current volatility. COT report: On Friday, a new COT report for June 6 was released. In the last 9 months, COT reports have fully corresponded to what is happening on the market. The chart above clearly shows that the net position of big traders (the second indicator) began to grow again in September 2022.   At the same time, the euro resumed an upward movement. The net position of non-commercial traders is bullish. The euro is trading at its highs against the US dollar. I have already mentioned that a fairly high value of the "net position" indicates the end of the uptrend. The first indicator also signals such a possibility as the red and green lines are very far from each other. It often occurs before the end of the trend. The euro tried to start falling a few months ago but there was only a pullback. During the last reporting week, the number of long positions of the "Non-commercial" group of traders decreased by 5,700 and the number of short positions rose by 1,500. The number of long positions is higher than the number of short ones. This is a very large gap. The number of long positions is 59,000 higher than short ones.     The difference is more than three times. The correction has begun. Yet, it may not be a correction but the start of a new downtrend. At this time, it is clear that the pair is likely to resume a downward movement without COT reports. 1H chart of EUR/USD In the 1-hour chart, the pair is trying to start an uptrend but there are no drivers for growth. Last week, there were many events that bolstered its rise. However, in the medium term, there are still no reasons to go long. Technical indicators signal an uptrend.   It would be better not to sell the pair now. We need to wait at least for consolidation below the trend line and the target level. On June 21, trading levels are seen at 1.0581, 1.0658-1.0669, 1.0762, 1.0806, 1.0868, 1.0943, 1.1092, 1.1137, as well as the Senkou Span B line (1.0766) and the Kijun-sen line (1.0889) lines. Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance although no signals are made near these levels.   Signals could be made when the price either breaks or bounces from these extreme levels. Do not forget to place Stop Loss at the breakeven point when the price goes by 15 pips in the right direction. In case of a false breakout, it could save you from possible losses. Several ECB and Fed officials are scheduled to deliver speeches today. However, traders are likely to ignore their statements. Federal Reserve Chairman Jerome Powell will deliver an important speech in Congress. The main focus is on that.  

The GBP/USD currency pair was traded with low volatility on Tuesday but still managed to move upwards, while the euro currency stood still and decreased more than it grew. Thus, even on a completely empty Tuesday, the pound sterling found reasons to start moving north again.   The price has re-fixed above the moving average and is still very close to its local maximums, which also coincide with the annual maximums. The British currency still cannot correct down properly, which is especially visible in the 24-hour timeframe. Occasionally, there are downward corrections on the 4-hour timeframe, but in most cases, they are purely formal.   The logic of the movements needs to be improved. Two weeks ago, when the Bank of England unexpectedly raised the rate by 0.5% for many, the pound did not grow. But yesterday, when it was a holiday in the States, it added about 40-50 points. The British economy is still weak and is holding out with the last of its strength not to slide into a recession.   US GDP exceeds forecasts by 0.7% and shows a value of +2% q/q. The Bank of England's rate continues to rise but is still lower than the Fed's. The British regulator can raise the rate several times but will likely stay within the Fed's rate. All this suggests that even if the dollar doesn't have strong reasons to grow now, it certainly has no reasons to fall. However, in most cases, we continue to observe the pair's growth. Only business activity indices in the manufacturing sectors can be highlighted for the first two days of the week. In the US and UK, the indices fell synchronously for June and have long been below the "waterline" of 50.0. Again, the pound did not have an advantage over the dollar due to macroeconomic statistics.     Thursday and Friday promise to be "stormy"! The week's most important events are concentrated in its last two days. Today, of course, the Fed's minutes will be published. In the European Union and Britain, the second estimates of business activity indices for June will become known, but all these are secondary data. It is unlikely that the Fed's minutes will surprise traders who are already confident in a rate hike in July, as well as after Jerome Powell's five speeches over the past weeks, in which he laid everything out. Therefore, the main movements are planned for Thursday and Friday, when the ISM, ADP, unemployment benefit claims, the number of job openings, NonFarm Payrolls, and the unemployment rate will be released in the US.   As we can see, almost all reports are related to the labor market, which the Fed continues to monitor closely, and which has a priority for the regulator and the market. However, even if the reports are disastrous (which is currently hard to believe), the Fed will not change its plans to raise the rate.   And for the GBP/USD pair, it doesn't matter at all. The pound grows for a reason and without. If statistics from overseas turn out to be weak, it will merely get a new reason to grow against the dollar. If the statistics from the US turn out to be strong, we will see a new pullback down, a maximum of 100 points, and the Fed's position on the rate will not change. Thus, the market's local reaction could be significant.   In the medium term, these reports will not affect the situation in the market. The average volatility of the GBP/USD pair over the last 5 trading days is 94 points. For the pound/dollar pair, this value is "medium." Therefore, on Wednesday, July 5, we expect movement within the range limited by levels 1.2612 and 1.2800. The Heiken Ashi indicator's reversal down signals a possible new downward movement wave.    

The GBP/USD pair surprisingly edged higher on Tuesday. Volatility was naturally very low, but nevertheless, the pound sterling moved from the day's low to its high by about 60 points. Along the way, it even formed several good trading signals. Thus, even on a muted day with no economic data scheduled in the calendar, the market found reasons for long positions on the pound. Therefore, we can quite expect the upward movement to be ignited, as GBPUSD has been in a prolonged uptrend since October 2022.   This trend has been driven by momentum, and the pound's growth is groundless. However, keep in mind that the market can push the pair in any direction even without justifications. Two buy signals materialized during the European trading session. First, the pair overcame the level of 1.2693, and then rebounded from it from above, duplicating the buy signal. At the beginning of the US session, it reached the Senkou Span B line (twice), that is, a sell signal was formed.       Therefore, long positions needed to be closed and short ones opened. There were no more signals for the rest of the day, so shorts should have been closed manually closer to the evening. Both deals turned out to be profitable, with a total profit of about 35 points. COT report: According to the latest report, non-commercial traders opened 2,800 long positions and closed 2,500 short ones.   The net position increased by 5,300 in just a week and continues to grow. Over the past 9-10 months, the net position has been on the rise. We are approaching a point where the net position has grown too much to expect further growth. We assume that a prolonged bear run may soon begin, even though COT reports suggest a bullish continuation. It is becoming increasingly difficult to believe in it with each passing day. We can hardly explain why the uptrend should go on. However, there are currently no technical sell signals. The pound has gained about 2,500 pips. Therefore, a bearish correction is now needed. Otherwise, a bullish continuation would make no sense. Overall, non-commercial traders hold 52,300 sell positions and 104,400 long ones. Such a gap suggests the end of the uptrend. We do not see the pair extending growth in the long term.  

1H chart of GBP/USD In the 1-hour chart, GBP/USD maintains a bullish bias, although it is correcting at the moment. The ascending trend line serves as a buy signal. However, we still believe that the British currency is overvalued and should fall in the medium term. The pair overcame the downward trend line, so the pound has an opportunity to show another round of the uptrend. So far, it has not crossed the Senkou Span B line, but it is the last line of defense on the way to a new uptrend. On July 5, trading levels are seen at 1.2349, 1.2429-1.2445, 1.2520, 1.2598-1.2605, 1.2693, 1.2762, 1.2863, 1.2981-1.2987. The Senkou Span B (1.2726) and Kijun-sen (1.2662) may also generate signals when the price either breaks or bounces off them.   A Stop Loss should be placed at the breakeven point when the price goes 20 pips in the right direction. Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance which can be used for locking in profits. On Wednesday, services PMI numbers for the UK in the second estimate for June will be released. Not the most significant indicator. We have the FOMC minutes for release in the US, which rarely contains important information. The pair will likely go through low volatility, but as we can see, the lack of news does not prevent the pound from continuing to rise against the USD.       Indicators on charts: Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals. The Kijun-sen and Senkou Span B lines are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe. They are also strong lines. Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals. Yellow lines are trend lines, trend channels, and other technical patterns. Indicator 1 on the COT chart is the size of the net position of each trader category. Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.  

FX Daily: Carry trade en vogue despite monetary hikes, pauses and cuts Monetary policy tightening cycles are close to their peak in the G10 space, although this week should see a 25bp hike in the UK and possibly Australia too. Policy changes are more advanced in parts of the EM world, where Chile cut rates 100bp on Friday and Brazil should start easing this week too. However, low volatility looks set to remain a key driver of FX.   USD: Overnight rates at 5.30% make the dollar an expensive sell The dollar is proving quite resilient. Overnight USD rates at 5.30% are probably playing a role here. Also, evidence of a 'Goldilocks' scenario in the US is helping too, where there are further signs of disinflation even though US consumption is holding up quite well. This compares to Europe and China where business surveys remain soft and the concern is that stagnation deteriorates into contraction. Testing the US soft-landing thesis this week will be the release of ISM surveys and Friday's nonfarm jobs report. Later today we will also see the Federal Reserve's Senior Loan Officer Survey, where we'll receive insights on lending volumes and how much credit conditions have tightened. Recall that the equivalent survey from the European Central Bank last week undermined the euro. Some last vestiges of tightening cycles in G10 economies can be offset against developments in emerging markets. Here, Latin America saw some of the earliest and most aggressive tightening cycles during the pandemic and, on Friday, Chile kicked off easing cycles with a 100bp rate cut. Money markets seem to imply expectations of a 700bp rate cut over the next 12 months. And Brazil is expected to start easing on Wednesday with a 25bp cut. In theory, this should be good for emerging market growth prospects (and EM portfolio flows) and a slight dollar negative. The risk, however, is that rates are cut too far too fast - let's see. Also, look out today at 0900CET for any new measures from China's State Council to boost consumption (and EM growth prospects). Despite this diverging global growth and monetary policy story, cross-market volatility remains low - perhaps as investors are now expecting prolonged pauses in core interest rate markets. This remains a negative for the Japanese yen and a positive for the high yielders including the Mexican peso and the Hungarian forint. The dollar is probably trapped somewhere in the middle here and unless we see some sharp deterioration in US activity that would favour the Fed not just pausing, but easing - the dollar can probably trade out ranges over coming weeks. DXY to trade 101.00-102.00 near term.

EUR: Lack of strong support EUR/USD appears stuck in a relatively low volatility environment, despite feeling some pressure. The swings in the 2-year swap rate differential are not proving dramatically impactful on the pair, but the retightening of the spread from the 140bp area to the 134bp is probably offering a bit of support. Eurozone data continued to do very little to help a rapid turnaround in the euro’s softish momentum, though. Yesterday, 2Q GDP growth was confirmed at 0.3% QoQ and employment figures at 0.2% QoQ. With forward-looking indicators pointing at an economic slowdown in key parts of the euro area, a EUR/USD rally later this year (which is still our base case) should rely primarily on a decreasing attractiveness of the dollar rather than on an idiosyncratic EUR boom. It may be yet another rather quiet day in FX today, and barring a major surprise on the US data side – and considering the eurozone calendar is quite light – EUR/USD should keep hovering around 1.0850/1.0900.

FX Daily: Low vol environment continues US jobs numbers continue to cause ripples in a becalmed summer FX market. Expect more of the same today as the market focuses on the weekly initial claims ahead of tomorrow's big NFP report. In Europe, the focus will be on the eurozone's August CPI release. Expectations of a further hike from the ECB are firming up and justify EUR/USD trading at 1.09-1.10.   USD: Thrashing around in a low vol environment Second-tier US jobs data (JOLTS and ADP) have seen the dollar soften a little this week. However, the data have yet to prove the smoking gun that can mark the end of the Federal Reserve's hawkish stance. Stronger trends will only start to develop should we see a large downside miss on tomorrow's release of the August NFP jobs data or a sharp rise in the unemployment rate. That would undermine the thesis that strong employment consumption can keep the Fed in hawkish mode for a lot longer than most think.  For today, the focus will again be on some second and third-tier jobs data in the form of the weekly initial claims read. We will also see personal income, spending, and the core PCE deflator for July. Consensus actually sees the core PCE deflator rising to 4.2% year-on-year from 4.1% – so hardly a reason for markets to add to dollar short positions. In general, cross-asset market volatility remains low and there is not much to argue against the Japanese yen or Chinese renminbi-funded carry trade. As we have noted before, 5.30% overnight rates mean the dollar can hold gains in a carry trade environment. Currencies outperforming remain the EM high-yielders, such as those found in the CEE3 region and also Latam. Here, the Mexican peso continues to hold gains and offer near 12% implied yields. The peso should also be helped by the latest remarks from Banxico that, unlike Brazil and Chile, it is not considering rate cuts anytime soon. Unless we see a sharp spike in the weekly initial claims data today, we suspect DXY does not break too far from a 103.00-103.50 range.

Bank of Japan opens the door to ending negative rates, but timing uncertainty remains The Bank of Japan stood pat on monetary policy today as widely expected. But the market is now paying attention to a more positive tone on the wage and inflation outlook, as well as an upgrade to the FY2024 inflation outlook which lays the groundwork for policy normalisation. We still see a slightly higher chance of a first hike taking place in June than in April.   No surprise that the BoJ kept its policy rate and 10-year yield target unchanged We think the Bank of Japan's modest change in its view on inflation hints that policy normalisation is approaching. The BoJ assessed its statement that the likelihood of achieving the price goal has “continued to gradually rise.” Governor Kazuo Ueda’s comments on wages and inflation were also more positive than in previous meetings, signalling that a path to policy normalisation could be underway. Markets were likely pleased to hear that the central bank would consider whether negative rates should remain if the price goal is in sight and that it can make policy decisions without all small firm wage data.   Quarterly outlook report Aside from the policy decision itself, the BoJ’s quarterly outlook report was closely watched by market participants. As we expected, the BoJ lowered its core inflation outlook for FY 2024 from 2.8% to 2.4% while upgrading the outlook for FY 2025 from 1.7% to 1.8%. The government's efforts to curb inflation and the recent weaker-than-expected global commodity prices will likely drag down the price for early 2024, but the BoJ still sees underlying inflation pressures remaining through FY 2025, induced by solid wage growth. This tells us that a rate hike is only a matter of time – but with the BoJ reconfirming its patient easing stance, the timing remains uncertain.     BoJ outlook Market bets on an April rate hike increased sharply after today’s decision, but for now, we retain our long-standing view of the first rate hike materialising in June. Of course, this could change depending on upcoming inflation trends and growth conditions. There was no change in the forward guidance from today’s statement, and we don’t think the BoJ will deliver any policy changes at its next meeting in March. We also don't expect it to make any noise by delivering a surprise policy change at the end of the fiscal year. Governor Ueda has stated that more information will be available ahead of the April meeting than in March, so we're inclined to think that the latter is probably off the table. There are several areas to follow to gauge the precise timing of the BoJ’s policy change, but inflation should be considered the most important of them all. In our view, the inflation path up until April will be quite bumpy, exacerbated by the government’s energy subsidy programmes. Consumer inflation has slowed over the past two months as the government renewed some of the subsidy programmes from last November, combined with softening oil prices. We expect inflation to move even lower in January (vs 2.2% in December) but pick up quite sharply again in February. April CPI is a key piece of data for judging the inflation trend, but by the time the April meeting is held, the nationwide CPI report won't yet be available. April is also in the middle of the wage-negotiating Shunto season. While Governor Ueda mentioned that there isn't any need to wait to gather all data from small firms, we belive that the BoJ will wait a couple of more months to see if the wage growth could actually lead to sustain inflationary pressure – particularly in service prices. The BoJ will take orderly steps, including forward guidance being revised before any action is taken. We think that this revision will likely happen in April. Taking these factors into consideration, we still expect the Bank of Japan to announce its first rate hike in June for now.     Choppy inflation is expected at least for 1Q24   FX: Not hawkish enough USD/JPY held pretty steady after the release of the BoJ decision but dropped around 0.7% as Governor Ueda hinted that wages and prices were heading in the direction of price stability. The same thing occurred in the JGB market, with 10-year JGB yields edging about 3-4bps higher around the same time as USD/JPY sold off. As above, market expectations of a shift in BoJ policy will now roll on to the 26 April meeting, when the next set of CPI forecasts will be released. Today’s price action, where the yen is now handing back its short-term gains, suggests the market will be happy to park the BoJ policy normalisation story until April. Given further upside risks to US rates over the next month – including the risk of higher Treasury yields next week, should the US quarterly refunding announcement shine a light on the US fiscal deficit – USD/JPY can probably continue to trade around this 147/148 area. And BoJ intervention remains a threat should USD/JPY trade over 150 again. We currently have USD/JPY forecasts at 140 for the end of March and 135 for the end of June. We certainly like that direction of travel – particularly if the short-end of the US curve starts to break lower ahead of the first Fed hike, which we forecast in May. The risk is that mixed market sentiment and low volatility keep interest in the carry trade and keep the yen softer than our end-of-first quarter target. However, we suspect carry trade investors will be increasingly turning to the Swiss franc as their preferred funding currency. The Swiss National Bank wants a weaker currency and may be the first to ease. The BoJ wants a stronger currency and will now be the only G10 central bank to hike.