NZD: Asia-Pac: NZD/USD Drifts Back Toward 0.5650
The NZD/USD had a range today of 0.5648 - 0.5660 in the Asia-Pac session, going into the London open trading around 0.5650, -0.10%. The NZD has given back most of its overnight gains. The NZD does stand out as a vehicle to express a short in but should this bout of improved risk sentiment grow it will be tough for the NZD to ignore it and it could play catch up to the move at some point, if you feel this bounce in risk will fail and move back lower then the NZD remains a great way to express that. I still suspect any decent bounce will again attract sellers though. The first sell area on a pullback would be around 0.5750 and then the more pivotal 0.5850 area. Dips on the day toward 0.5630-40 needs to hold for the short-term retracement to potentially extend, through here and the focus returns back to making new lows.
- "GOLDMAN PUSHES BACK ITS CHINA RATE CUT FORECASTS BY ONE QUARTER, GOLDMAN NOW SEES CHINA DELIVER CUTS TO POLICY RATE, RRR IN 1Q" - BBG
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5600(NZD538m), 0.5800(NZD461m). Upcoming Close Strikes : 0.5380(NZD460m Nov 13) - BBG
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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JPY: Asia-Pac: USD/JPY Consolidates Around 152.00
The USD/JPY range has been 151.74 - 152.28 in the Asia-Pac session, it is currently trading around 151.90, +0.45%. The pair collapsed with risk and US yields, and I am a little surprised the bounce this morning has not been bigger on the more conciliatory tone now being used. The Crypto market has led the retracement in risk higher over the weekend as the temperature was lowered, but the huge deleveraging of positions and the first crack in the markets conviction will be hard to just shake off. The JPY crosses in particular took the brunt of it on Friday and the rejections some pairs had look ugly. It will be interesting to see how the week starts and how much faith the markets have in those in charge to sort this mess out amicably. Technically dips back toward the 150/151 area should now find support first up.
- The FT is reporting the Dutch Government is taking control of the Chinese-owned chipmaker Nexperia, which could further inflame the situation. Arnaud Bertrand wrote a thread on X: “It invites retaliation from China, which is almost systematic. I wouldn't want to be a Dutch company with Chinese operations right now.”
- "KOMEITO DOESN'T RULE OUT OPPOSITION PARTY COOPERATION: KYODO" - BBG
- Options : Close significant option expiries for NY cut, based on DTCC data: 150.00($340m), 151.00($856m). Upcoming Close Strikes : 150.00($986m Oct 15) - BBG.
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
AUD: Asia-Pac: AUD/USD Bounces With Risk & A Lower CNY Fix
The AUD/USD has had a range of 0.6491 - 0.6533 in the Asia- Pac session, it is currently trading around 0.6520, +0.75%. Some clarification from China over the weekend on their new rare earth export controls has seen the US walk back its aggressive stance and a more conciliatory tone is being set. I suspect a lot of Friday's moves will see some decent pullbacks on this, but how long it lasts is anybody's guess. The AUD has gapped higher on the open and another very low CNY fix from the PBOC has underpinned the move for now. A lot of leverage would have been taken out last week and it's very hard for the market to just regain the conviction it previously had so I suspect the rally will stall at some point as those still overweight risk use the opportunity to pare back.
- The FT is reporting the Dutch Government is taking control of the Chinese-owned chipmaker Nexperia, which could further inflame the situation. Arnaud Bertrand wrote a thread on X: “It invites retaliation from China, which is almost systematic. I wouldn't want to be a Dutch company with Chinese operations right now.”
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6550(AD403m), 0.6555(AUD529m). Upcoming Close Strikes : 0.6500(AUD1.01b Oct 14), 0.6600(AUD948m Oct 14), 0.6650(AUD880m Oct 14) - BBG
- AUD/JPY - Asia-Pac range 98.57 - 99.23, Asia is trading around 99.05. The pair had an ugly rejection above 100. This morning the pair has bounced in sympathy with risk rallying, but it will need this move in risk to get back to the previous highs for it to look at breaking above 100 again.
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
US TSYS: Futures Move Lower As Flare Up Is Trying To Be Walked Back
The TYZ5 range has been 112-30 to 113-03+ during the Asia-Pacific session. It last changed hands at 113-00, down 0-04+ from the previous close.
- 10-Year yields accelerated lower on Friday on the back of China/US Escalation. Some clarification from China over the weekend on their new rare earth export controls has seen the US walk back its aggressive stance and a more conciliatory tone is being set. I suspect a lot of Friday's moves will see some decent pullbacks on this, but how long it lasts is anybody's guess.
- The Cash Market was closed in Asia due to a Japanese Holiday.
- Robin Brooks wrote a substack expanding on how he thought markets might play out if the situation escalates again: “If the China-US trade war escalates and China devalues, there'll be lots of collateral damage: (i) US Treasury market will go "yippy" like in April; (ii) high-debt countries like Japan and France will suffer; (iii) $-pegs in Argentina and Turkey will blow.” https://t.co/Sh4nlrKDWC
Fig 1: 10-Year US Yield Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
