• USD/JPY brushes against key technical level at seven-week highs
• FDIC accepts JP Morgan bid for First Republic Bank
• What have markets priced in for the key central bank decisions this week?
• Japan April consumer confidence index 35.4 vs 33.9 prior

Markets:

• AUD leads, JPY lags on the day
• European markets closed; S&P 500 futures down 0.1%
• US 10-year yields up 3 bps to 3.481%
• Gold down 0.1% to $1,988.20
• WTI crude down 2.2% to $75.09
• Bitcoin down 2.6% to $28,578

It was a quiet session for the most part with European markets out for the long weekend amid the Labour Day holiday.

The dollar was steady throughout, with sentiment helped slightly by the news that JP Morgan is set to take over First Republic Bank. That could lead to some follow through moves later in US trading, so just be mindful of that.

The yen is the laggard as it continues to deepen losses from last week, with USD/JPY touching its 200-day moving average just below the 137.00 mark.

Besides that, things were largely slow-moving as market players are waiting to get the week started in Wall Street. The focus in the days ahead will center around key central bank policy decisions and that will set the tone for what to expect in May trading.

This article was written by Justin Low at www.forexlive.com.

• RBA: 90% probability of no change, 10% probability of 25 bps rate hike (OIS)
• Fed: 92% probability of 25 bps rate hike, 8% probability of no change (Fed funds futures)
• ECB: 81% probability of 25 bps rate hike, 19% probability of 50 bps rate hike (€STR)

Among the three, it is only the ECB pricing that might shift around a little ahead of the Thursday decision. That will be dependent on what we see from the Eurozone CPI data tomorrow, as pointed out earlier here.

The RBA meanwhile will be a rather straightforward one, as they are widely expected to keep the cash rate unchanged. And they are also likely to deliver a similar communique to what we already saw last month.

As for the Fed, that is where things start to get interesting for broader markets. While a 25 bps rate hike is almost certainly a done deal, what comes next is still up in the air for the most part. Will the Fed stick with a higher for longer approach and narrative? Or will they acknowledge that the time is now here to call for a pause?

Whatever the case is, it will definitely have an impact on the Fed funds futures curve.

As things stand, traders are pricing in two rate cuts by year-end and that the Fed will pause after this week’s rate hike.

We shall see whether or not policymakers agree with that view and how Powell will communicate that when the time comes on Wednesday.

This article was written by Justin Low at www.forexlive.com.

The dollar is sitting mostly higher on the day, with slight gains seen against the euro, pound and yen. Meanwhile, it is holding lower against the aussie with the RBA in focus tomorrow. EUR/USD is down 0.3% to 1.0990 and continues to hang in and around the 1.1000 mark for now:

Buyers are still hoping to try and secure a firm break above 1.1000 with the 2 February high at 1.1033 still proving to be an impediment when you look at the weekly chart. That seems to make clear how EUR/USD is still struggling for an upside break above the 1.1000 mark for the time being.

Meanwhile, GBP/USD is down 0.4% to 1.2520 and despite the weekly close and break above the 1.2500 mark, buyers are struggling a little to start the new week. A drop back below the figure level would be a massive blow to the momentum gathered on Friday.

Elsewhere, USD/JPY is sitting higher around 136.80 at the moment but off its earlier highs as buyers are contesting with key technical resistance from its 200-day moving average as highlighted here.

This article was written by Justin Low at www.forexlive.com.