FOREX: Asia FX Wrap - BBDXY Testing 1200 On US Shutdown

The NZD/USD had a range of 0.5890 - 0.5914 in the Asia-Pac session, going into the London open trading around 0.5905, +0.20%. The USD can’t catch a break and continues to trade heavy helping the NZD grind higher. The NZD has bounced off its support toward 0.5800, sellers should continue to be around looking to fade the move back towards the 0.5950 area initially. Should the USD break lower and gain momentum this would complicate this trade and then it would be prudent to rotate the NZD shorts into the crosses.

• Bloomberg - “New Zealand Opens Luxury Home Market to Golden-Visa Holders: New Zealand will loosen its ban on foreigners buying houses, opening the door for wealthy investors to purchase luxury properties as part of a push to revive its sluggish economy.”
• “The coalition government on Monday said it will allow holders of so-called golden visas to buy houses worth at least NZ$5 million ($3 million).”
• "NZ'S LUXON: I'VE GOT EVERY CONFIDENCE IN RBNZ, WAS RIGHT DECISION FOR RBNZ CHAIR QUIGLEY TO GO" - BBG
• Options : Closest significant option expiries for NY cut, based on DTCC data:  none. Upcoming Close Strikes : 0.5700(NZD500m Sept 2), 0.5700(NZD384m Sept 3) - BBG
• CFTC Data of last week shows Asset Managers added slightly to their new short position in the NZD -4743(Last -3198), the Leveraged community have almost completely exited their short -225(Last -4004).
• AUD/NZD range for the session has been 1.1072 - 1.1110, currently trading 1.1080. Momentum higher looks to have stalled above 1.1100 for now, look for demand to return on a dip back towards the 1.1000 area.

Fig 1: NZD CFTC Data

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

Gold prices are 0.9% higher at $3478.0/oz after a peak of $3486.11 which followed a low of $3437.11. It is above resistance at $3451.3 opening up the bull trigger at $3500.1. The US dollar is only slightly lower but generally risk appetite is a bit weaker ahead of a number of risk events this week.

• There could be a decision on whether Fed Governor Cook can continue in her role as early as Tuesday and August payrolls print on Friday, which could shift market pricing for a September 17 rate cut in either direction. Currently over an 85% chance is priced into the market.
• Following a US appeals court decision on Friday that this year’s tariffs are illegal, uncertainty over their future remains high. They remain in place though until a final ruling is made.
• Silver is up sharply by 1.9% to $40.48, breaking above round number resistance at $40.00 reinforcing the uptrend. It reached a high of $40.539 earlier.
• Equities are mixed with the Hang Seng up 1.8%, S&P e-mini flat and Nikkei down 1.7% and KOSPI -1.1%. Oil prices are lower with WTI -0.4% to $63.74/bbl. Copper is 0.1% higher.
• The US is closed for a holiday. Later ECB President Lagarde speaks and ECB’s Schnabel and Cipollone appear. European August manufacturing PMIs and euro area July unemployment are released.

The Asia-Pac USD/JPY range has been 146.84-147.38, Asia is currently trading around 146.90, -0.10%. USD/JPY initially tried higher after the Japanese Fix, but ran into sellers and quickly fell back below 147.00. The demand  towards 146.00 has been pretty solid all of July and August, keeping us for the most part in a 146.00-149.00 range. A sustained break below 145.50/146.00 is needed to to turn the focus back to the year's lows towards 140.00. 

• CFTC data for last week shows leveraged accounts have maintained their recent JPY shorts and will be hoping this support continues to be solid. A sustained break below 145.50/146.00 is needed to to turn the focus back to the year's lows towards 140.00. The options market is showing signs of these JPY shorts beginning to buy strikes lower down to hedge themselves.
• (Bloomberg) --Leveraged investors are building positions in the options market that will benefit if Japan’s currency breaks free from its current narrow band of around 147 to the greenback and appreciate beyond 145, data from the Chicago Mercantile Exchange show.
• “Yen Shorts Are Running Out of Road as BOJ Hike Nears: USD/JPY’s downward path is set to accelerate at the start of a new trading month as big leveraged shorts will find it harder to justify their stance with an October BOJ rate hike looking increasingly likely. Especially as traders price for more rate cuts from the Federal Reserve.” - BBG
• MNI BRIEF: Japan Q2 Capex Lower; GDP Seen Revised Down. Bank of Japan officials are focused on the September Tankan survey due Oct 1 to assess the impact of tariffs on corporate profits and business plans, particularly capex. While demand for investment to ease labour shortages remains firm, global demand uncertainty is prompting some firms to delay implementation.
• Options : Close significant option expiries for NY cut, based on DTCC data: 146.35($310m).Upcoming Close Strikes : 146.50($1.39b Sept 3), 145.50($976m Sept 3)  - BBG.
• CFTC data shows last week asset managers again added to their JPY longs after a consistent period of reduction +76761( Last +71379), leveraged funds though again used the dip to add slightly to their newly built short JPY position -52275(Last -50848). One of them is going to be wrong.

Fig 1 : JPY CFTC Data

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