FOREX: Asia FX Wrap - The USD Support Continues To Hold For Now
The BBDXY has had a range of 1202.47 - 1204.11 in the Asia-Pac session, it is currently trading around 1203, +0.10%. The USD was again surprisingly able to shrug off the extension lower in US yields and found solid demand below 1200 helping it keep the support in place for now. A sustained break below 1197/1195 is needed to regain the momentum lower and retest the year's lows.
- EUR/USD - Asian range 1.1704 - 1.1721, Asia is currently trading 1.1715. The pair bounced on Friday in response to the NFP but momentum stalled into the close. EUR trades firmly within its wider 1.1350-1.1850 range with a bias to the topside.
- GBP/USD - Asian range 1.3483 - 1.3506, Asia is currently dealing around 1.3495. The pair bounced strongly off its support around 1.3350 last week. The move above 1.3500 on NFP has stalled but price is now back in the middle of its 1.3350-1.3650 range. A sustained break below 1.3350 is needed to open up a move back to 1.3100.
- USD/CNH - Asian range 7.1244 - 7.1283, the USD/CNY fix printed 7.1029, Asia is currently dealing around 7.1325. 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 +0.10%, Gold $3581, US 10-Year 4.10%, BBDXY 1203, Crude Oil $62.58
- Data/Events : EZ Sentix Investor Confidence, Germany Industrial Production/Trade Balance
Fig 1: BBDXY Spot 2H Chart
Source: MNI - Market News/Bloomberg Finance L.P
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AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
