AUD: Aussie Hovers Above Two-Month Lows, CPI Report Takes Focus
All eyes are on Australia's quarterly CPI data today, expected to show further acceleration in the pace of price growth. Headline inflation is expected to have quickened to +4.6% Y/Y in Q1, with a key gauge of core price growth (CPI trimmed mean) seen printing at +3.4% Y/Y in breach of the RBA's target range.
- Consumer price data come ahead of the release of Australia's terms of trade (Thursday) and factory-gate inflation (Friday).
- AUD/USD has added a handful of pips this morning and last deals at $0.7132, moving away from Tuesday's two-month low of $0.7119.
- Yesterday's losses came on the back of unfavourable risk backdrop, with China's Covid-19 situation and ongoing war in Eastern Europe undermined sentiment, despite the PBOC's pledge to increase support for the economy.
- On the downside, the technical focus falls on $0.7095, which limited losses on Feb 24. A break here would give bears a green light for targeting Feb 4 low of $0.7052. Meanwhile, initial resistance is seen at Monday's high of $0.7261.
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US TSYS: Futures Lower To Start The Week
TYM2 trades on the backfoot as crude oil futures pull lower to start the week, with the latter dynamic likely aided by weekend comments from Yemen's Houthi group, as it noted that it was suspending missile and drone strikes on Saudi Arabia for three days. RTRS have highlighted that the group said the peace initiative “could be a lasting commitment if the Saudi-led coalition fighting in Yemen stopped air strikes and lifted port restrictions.” A reminder that missiles launched by the group successfully struck Saudi oil facilities on Friday of last week.
- The impulse from lower oil prices is seemingly outweighing other news flow from the weekend, which were headlined by the declaration of a two-stage lockdown in the Chinese city of Shanghai, while the White House had to quickly row back comments from U.S. President Biden which seemingly pointed to a want for regime change in Russia, stressing that was not the end goal of U.S. policy re: the Russia-Ukraine conflict.
- Thus, the move lower in crude oil prices has taken some of the stagflationary element out of Tsy futures (at the margin), leaving TYM2 -0-01+ at 121-16, as the contract takes a look below Friday’s worst levels.
- To recap, the recent run of weakness in U.S. Tsys extended ahead of the weekend, with a fresh round of hawkish FOMC views from the sell-side, focus on reports flagging Russia targeting “full control” of a limited area of Ukraine, as opposed to the whole country, and potential convexity-hedging related flows seemingly in the driving seat on Friday. That left Tsys 5-15bp cheaper across the curve come the close, with 5s leading the weakness as the curve bear flattened.
- There isn’t anything of note in terms of wider risk events on Monday’s Asia-Pac docket. Looking ahead, NY hours will bring advance goods trade data, inventory readings and the latest Dallas Fed m’fing activity print. Meanwhile, 2- & 5-Year Tsy auctions headline on the supply front.
AUSSIE 10-YEAR TECHS: (M2) Bearish Outlook Strengthens
- RES 3: 98.755 - High Sep 23
- RES 2: 98.430/460 - High Dec 21 / 06
- RES 1: 98.130 High Feb 3
- PRICE: 97.070 @ 16:18 GMT Mar 25
- SUP 1: 97.040 - Low Mar 25
- SUP 2: 96.947 - 3.0% Lower Bollinger Band
- SUP 3: 96.910 - 0.5% 10-dma envelope
Aussie 10y futures edged to fresh cycle lows again Thursday, reinforcing the downside bias present in Aussie fixed income markets. The move lower exposes next support posted at the 3.0% Lower Bollinger Band at 96.947, but support is expected stronger into the 0.5% 10-dma envelope - which crosses at 96.910 currently. Outlook remains resolutely bearish through the futures roll.
AUSSIE 3-YEAR TECHS: (M2) Multiyear Lows
- RES 3: 99.795 - High Aug 20 (cont)
- RES 2: 99.300 - High Oct 14/15
- RES 1: 98.675/920 - High Feb 1 / High Dec 29 and key resistance
- PRICE: 97.445 @ 15:55 GMT Mar 25
- SUP 1: 97.425 - Low Mar 25
- SUP 2: 97.355 - 0.5% 10-dma envelope
- SUP 3: 97.185 - 50% 2009 - 2020 range
Aussie 3yr futures printed a fresh contract low Thursday, printing down at 97.425. This puts prices through the last levels of support layered at the 2018 lows. Prices are now at late-2014 levels, narrowing the gap with vol band support that undercuts today at 97.355 and points lower. On the longer-term charts, major support is scant until 97.185 - this level marks the 50% retracement for the 2009 - 2020 range.
