FOREX: Asia FX Wrap - The BBDXY Trades Heavy Back Above 1200

ACGBs (YM flat & XM flat) are unchanged on a local data-light day.

• MNI - The RBA decision is on Tuesday August 12 and is widely expected to cut rates 25bp to 3.60% given the further moderation in underlying inflation in Q2 and signs that the labour market has reached a turning point and is weakening. It had 50bp of easing for H2 assumed in its May projections. There will be an update to the RBA outlook provided with the decision but it is likely to be consistent with the Board's cautious approach to easing.
• There are also a number of key data releases too. Q2 wages print on Wednesday and July jobs data Thursday.
• Cash ACGBs are unchanged.
• Cash US tsys were closed during today's Asia-Pac session, with Japan out for a holiday.
• The bills strip is flat to -1 across contracts.
• RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut tomorrow is given a 97% probability, with a cumulative 62bps of easing priced by year-end.
• This week, the AOFM plans to sell A$1200mn of the 4.25% 21 December 2035 bond on Wednesday and A$1000mn of the 2.75% 2 1 November 2029 bond on Friday.

The BBDXY has had a range of 1202.58 - 1204.84 in the Asia-Pac session, it is currently trading around 1202, -0.15%. The USD has traded softer in our Session drifting back to the 1200 area. The market is very quick to pounce onto anything that potentially justifies selling the USD but the US CPI out tomorrow night could potentially add some headwinds to this trade in the short-term. I suspect we see some paring back of USD shorts going into this print and then trade the reaction. A sustained break back below 1198 points to a retest of the lows, and a bounce back towards 1220/1230 should probably be faded initially.

• EUR/USD -  Asian range 1.1642 - 1.1676, Asia is currently trading 1.1670. The pair has bounced nicely off the important 1.1300/1.1400 area. The market has stalled at its first attempt to challenge the resistance around the 1.1700 area, I would be surprised if it broke higher until we get the input from the US CPI tomorrow night.
• GBP/USD - Asian range 1.3436 - 1.3468, Asia is currently dealing around 1.3465. The pair bounced nicely off the 1.3100/1.3200 support area. I would suspect sellers could be around on this bounce back towards 1.3450 initially looking to fade this bounce. US CPI tomorrow night will have a say on whether this area caps or not.
• USD/CNH - Asian range 7.1826 - 7.1909, the USD/CNY fix printed 7.1405, Asia is currently dealing around 7.1850. Sellers should be around on bounces while price holds below the 7.2200/2500 area and the PBOC manages the fix lower. Above 7.2500 and we could see a test of the USD Shorts.
• Cross asset : SPX +0.15%, Gold $3367, TYU5 111-29, BBDXY 1202.90, Crude Oil $63.46
• Data/Events : France BBG Economic Survey, EZ BBG Economic Survey, Germany BBG Economic Survey, Italy BBG Economic Survey/CPI/Trade Balance, Spain BBG Economic Survey

Fig 1: GBP/USD Spot Daily Chart

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

Gold prices are 0.6% lower at $3378.7/oz during today’s APAC session. They fell to a low of $3367.79 before stabilising. The yellow metal has sold off as markets wait for clarification on the tariff-status of US gold imports. Stronger risk appetite with equities rallying is also pressuring bullion. In addition, President Trump and Putin are scheduled to meet on Friday in Alaska to discuss a peace deal for Ukraine potentially reducing geopolitical risks.  

• Gold was exempted from US tariffs in April but last week officials stated that 100oz and 1kg bars would face import duties introducing increased uncertainty into the market and risking the seamless operation of trade, according to Bloomberg.
• The disappointing July US jobs data returned bullion close to the top of its recent range and corrections are still seen as corrective. Today’s trough remained above initial support at $3268.2, 30 July low. Initial resistance is at $3409.2, 8 August high.
• Silver is down at -0.7% to $38.08 off the intraday low at $37.924. The trend remains bullish though and the metal is trading above initial support at $36.216, 31 July low. Initial resistance is at $39.655.
• The US dollar is weaker (BBDXY -0.2%). Equities are rallying with the S&P e-mini up 0.2%, Hang Seng +0.2% and TAIEX +0.5% but KOSPI flat. Oil prices continue trending lower with WTI -0.7% to $63.43/bbl. Copper is flat.
• There are few events coming up on Monday. Italian July CPI and June trade are released later. US CPI on Tuesday will be the main focus of the week but Friday’s July retail sales and preliminary August Uni of Michigan consumer sentiment will also be monitored.