AUSSIE BONDS: ACGB Dec-35 Supply Digested With Less Demand

US equities chopped around sideways on Friday unable to push higher after much better than expected results from both Amazon and Apple. This morning has seen stocks open the week higher, E-minis(S&P) +0.30%, NQZ5 +0.35%. The AUD is looking to consolidate some of its recent gains in the crosses as it looks to build on its recent outperformance.

• EUR/AUD - Friday night range 1.7599 - 1.7699, Asia is currently trading around 1.7615. The pair topped out again around 1.7700 and is once again testing the support in the 1.75-1.76 area. I suspect rallies toward 1.7700/1.7800 would now be faded but a break under the 1.7500 area is needed to signal a potential deeper pullback toward the 1.7000 area.
• GBP/AUD - Friday night range 2.0022 - 2.0108, Asia is trading around 2.0070. The pair has found some support around 2.0000 after breaking through its support around 2.0300. I suspect rallies will now be met with supply as the market will look to test the support in the 198-200 area where I think we should find some demand initially. 
• AUD/JPY - Friday night 100.66 - 100.98, Asia is trading around 100.90. The pair is consolidating around 101.00 at the moment as it looks to build on its recent move back above 100.00. Suspect dips will continue to be supported for now with the first target 102.50 and then beyond.
• AUD/NZD -  Friday night range 1.1426 - 1.1442, the cross is dealing in Asia around 1.1440. The Cross has bounced hard after finding solid demand back toward 1.1300. This 1.1400/1.1500 area remains tough resistance but the price action suggests the market wants to test it. Above 1.15/16 and the markets focus will start to turn toward 1.2000 and beyond.

Fig 1: EUR/AUD spot 2H Chart

Source: MNI - Market News/Bloomberg Finance L.P

The Russell 2000 Friday night range was 2455.98 - 2484.20, closing +0.54%. The Russell 2000 has not really managed to extend higher after its break above the previous all-time highs and momentum looks to potentially be stalling above 2500. The bulls will be looking for dips to be supported and the 2400 area to continue to hold as it tries to regain momentum higher. The risk is a break sub 2400 which would indicate a false break and signal a deeper pullback, but while this level holds the bulls remain in charge.

Fig 1: Russell 2000 Weekly Chart

Source: MNI - Market News/Bloomberg Finance L.P

ACGBs (YM -3.0 & XM -3.5) are slightly weaker despite cash US tsys closing last week on a firm note, with US yields flat to 3bps richer and the curve steeper.

• Reminder, Japan Holiday today, Culture Day, should keep Trade on the quiet and thin side until at least London arrives.
• NI Policy: RBA Board To Hold, Push Out Midpoint Return. The Reserve Bank of Australia Board is expected to keep the cash rate at 3.6% next Tuesday, following stronger-than-expected Q3 inflation. It is likely to push back the anticipated return of inflation to the midpoint in updated forecasts released alongside the decision.
• Cash ACGBs are 3-4bps cheaper with the AU-US 10-year yield differential at +25bps.
• The bills strip is -2 to -3 across contracts.
• RBA-dated OIS pricing is showing a 25bp rate cut in November at a 3% probability, with a cumulative 3bps of easing priced by year-end.
• Today, the local calendar will see the Melbourne Institute Inflation Gauge shortly.
• The AOFM plans to sell A$1200mn of the 4.25% 21 March 2036 bond on Wednesday and A$800mn of the 3.00% 21 November 2033 bond on Friday.