AUD: Asia Wrap - AUD Bounces With Higher US Equity Futures
The AUD/USD has had a range of 0.6502 - 0.6530 in the Asia- Pac session, it is currently trading around 0.6528. The AUD has again found demand back towards the 0.6500 area as it eyes testing above the 0.6550 area. Stocks have performed well in the Asian session and the AUD continues to benefit from this.
- AUSTRALIA DATA: May NAB Business Labour Costs Fastest Since January. NAB business price/cost components in May were mixed containing elements of concern and optimism. The pickup in labour costs in addition to signs that wage growth is rising again are likely to be monitored closely. The employment component of the survey though was very weak which may pressure pay gains.
- AUSTRALIA DATA: Westpac's measure of consumer confidence rose 0.5% in June to 92.6 after May's 2.2% increase boosted by 50bp of RBA easing this year and lower inflation. The index is at its highest since January but still 1.8% below that level as global events have weighed on sentiment.
- Price in the 0.6350 - 0.6550 range for now, a sustained break above 0.6550 is needed for the move higher to accelerate. Price looks set to test the top end of the range but I am not sure how far it extends until we get US CPI tomorrow out the way.
- Expect buyers to continue to be around on dips while the support in the AUD holds, a close back below 0.6350 is needed to challenge the newly formed uptrend.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.64200(AUD771m)/ 0.6460(AUD 529m). Upcoming Close Strikes : 0.6350(AUD 711m June 12), 0.6600(AUD643m June 12)
- CFTC Data shows Asset managers maintaining their shorts, the Leveraged community though continued to add to their shorts once more.
AUD/JPY - Today's range 94.15 - 94.59, it is trading currently around 94.58. Price broke the multiple tops around the 94.00 area over NFP’s. It has since managed to hold these gains, while this continues focus will turn to the high towards 96.00. Support should now be back towards the 93.00/50 area.
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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MACRO OUTLOOK: US PPI/Retail Sales And Powell Follow On Thursday [2/2]
- Core PCE implications will then be watched closely in Thursday’s PPI report, and we expect with additional focus on portfolio management after last month’s huge upward revision to February.
- Retail sales, whilst only reported in nominal terms, will offer a keenly awaited look at consumer behavior.
- Real spending moderated to 1.8% annualized in Q1 after 4.0% in Q4 despite likely tariff front-running, with April a good test of how much discretionary spending was pulled forward.
- Finally, Powell provides “Opening Remarks” at the Second Thomas Laubach Research Conference, although he’s allotted twenty minutes so there is scope for more substantive remarks than you’d usually expect. His message at Wednesday’s FOMC press conference was one firmly of being in no hurry to cut rates amidst huge uncertainty. He also appeared to put more weight on hard data over soft indicators that appear more stagflationary in nature.
MACRO OUTLOOK: US CPI Offers Look At April Tariff Distortions on Tuesday [1/2]
- The week’s US data calendar is highlighted by CPI inflation on Tuesday although PPI inflation and retail sales reports on Thursday are in close second. All three releases are going to be important, offering further hard data for April in the first month under reciprocal tariffs. What’s more, PPI and retail sales are followed by Fed Chair Powell just ten minutes after their release (more on that below).
- Core CPI inflation is seen accelerating to 0.3% M/M in April, with six unrounded estimates we’ve seen to date averaging 0.27% M/M.
- A potential for a ‘low’ 0.3% aside, it’s still likely a swift acceleration from a particularly soft 0.06% M/M in March which was in large part down to surprisingly abrupt declines in lodging away from home (-3.5%) and airfare (-5.3%) prices.
- This lodging weakness carried over to core PCE inflation back in March, at just 0.03% M/M after a particularly strong 0.50% M/M in February in a large wedge with core CPI at 0.23% M/M.
- Markets currently price a next Fed cut with the September FOMC meeting.
USDCAD TECHS: Pressuring Resistance
- RES 4: 1.4296 High Apr 7
- RES 3: 1.4111 High Apr 4
- RES 2: 1.4041 50-day EMA
- RES 1: 1.3943 High May 9
- PRICE: 1.3930 @ 16:06 BST May 9
- SUP 1: 1.3751 Low May 6
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
USDCAD has recovered from its recent lows. Despite the recovery, the trend condition remains bearish and short-term gains are considered corrective. A fresh cycle low on Tuesday reinforces the bearish theme. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Note that moving average studies are in a bear mode position, highlighting a dominant downtrend. Key resistance is seen at 1.4041, the 50-day EMA.
