AUD: AUD/USD Holds Above 0.6900, Mixed Performances On Crosses
AUD/USD holds above 0.6900 for now. AUD/EUR has edged up post the German inflation data, last 0.6570. Dips below 0.6550 have been supported in this pair over recent sessions
- The A$ hasn't taken much inspiration from the better retail sales print. Local yields track lower, although this is in line with offshore trends, a point reinforced by easing German NRW state inflation data.
- The AU-US 2yr spread has drifted lower but is away from recent lows, last at -32bps.
- Commodities aren't helpful at the margin. Iron ore is back to a $122/tonne handle, while copper has dipped just over 1% today. The metal remains above recent lows though.
- AUD/NZD is lower, back sub 1.1045, versus recent highs close to 1.1080. This is line with lower relative government bond yields (off 5bps in the 2yr spread), but swap spreads have been steady on the day.
- Tomorrow's data calendar contains largely second tier releases. Job vacancies for May are out, along with private sector credit and house prices for June print.
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US TSYS: Tight Overnight, Memorial Day Limits Activity With Cash Closed
Tsy futures clung to extremely tight ranges in Asia, with cash markets closed and liquidity thinned owing to the observance of the Memorial Day holiday in the U.S.
- The previously outlined risk-positive backdrop, which largely focused on the unwind of some COVID restrictions in the Chinese cities of Shanghai & Beijing (in addition to a raft of economic support unveiled for the former) failed to have a meaningful impact on Tsy futures (granted the S&P 500 is only +0.5% vs. settlement levels), although some light pressure has been observed as European traders start to file in.
- That leaves TYU2 -0-01+ at 120-03, with that level representing the base of the 0-05 overnight range. Note that the contract is operating on very light volume, with under 40K lots changing hands thus far.
- German CPI data and the continuing discussions re: the next round of EU sanctions on Russian oil exports will likely garner most of the interest on Monday.
- A quick reminder that cash Tsys will not be open until Tuesday’s Asia-Pac session, while Tsy futures will be subjected to holiday-curtailed hours on Monday.
AUDUSD TECHS: Bullish Extension
- RES 4: 0.7343 61.8% retracement of the Apr 5 - May 12 bear leg
- RES 3: 0.7266 High May 4/5 and a bull trigger
- RES 2: 0.7245 50.0% retracement of the Apr 5 - May 12 bear leg
- RES 1: 0.7169 50-day EMA
- PRICE: 0.7163 @ 22:13 BST May 29
- SUP 1: 0.7036 Low May 25
- SUP 2: 0.6950/29 Low May 18 / Low May 12 and the bear trigger
- SUP 3: 0.6805 Low Jun 22 2020
- SUP 4: 0.6784 0.764 proj of the Apr 5 - May 2 - 4 price swing
AUDUSD traded higher Friday and maintains a firmer short-term tone. The resumption of gains exposes the 50-day EMA, at 0.7169 today. This average marks an important resistance and a clear break is required to further strengthen bullish conditions. Gains are still considered corrective however and the primary trend direction is down. The bear trigger is 0.6829, May 12 low. Initial firm support to watch is at 0.7036, May 25 low.
EQUITIES: The Bid Extends
The combination of positive spill over from Friday’s U.S. equity trade (whereby the S&P 500 added 2.5% on the day, providing the firmest weekly gains observed for the index since late ’20), the unwind of some COVID-related restrictions in the Chinese cities of Beijing & Shanghai and the deployment of fresh support measures for Shanghai’s economy buoyed risk appetite in Asia. This extended what some perceive to be a bear market rally, while month-end rebalancing flows provide another potential supportive factor for U.S. equities. The Hang Seng & the Nikkei 225 added ~2.0% against this backdrop, while e-mini futures print 0.2-1.0% firmer on the day, with the NASDAQ 100 contract leading the bid there.
