AUD: Asia Wrap - AUD/USD Consolidates Around 0.6650
The AUD/USD has had a range of 0.6641 - 0.6662 in the Asia- Pac session, it is currently trading around 0.6660, +0.20%. US Equities traded sideways as the market turned its focus towards the FOMC this week and what the potential upcoming cutting cycle could look like. The AUD consolidates around 0.6650, trying to find the momentum it needs to accelerate above this pivotal area. Should the USD break and extend lower we could see the AUD gain momentum above 0.6650/0.6700 and potentially target levels back towards 0.6900/0.7000. The price action suggests dips will be supported for now as we await confirmation of this potential break higher, the first buy-zone is back towards the 0.6550 area.
- Bloomberg - “Aussie to Extend March Higher as Shorts Bail, Yuan Climbs. AUD/USD is pressing into a higher range, fueled by yuan strength, looming Fed cuts and leveraged shorts scrambling to cover. Net Aussie shorts are the smallest since November last year, and on the present course are likely to turn into longs with the FOMC to provide a dovish rate cut this week.”
- MNI BRIEF: China's August Investment Slows To Five-year Low. China’s fixed-asset investment growth decelerated to 0.5% y/y in the Jan–Aug period from the previous 1.6%, marking the slowest pace since Aug 2020 and missing an expectation of 1.5%, National Bureau of Statistics data showed Monday.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6500(AUD309m). Upcoming Close Strikes : 0.6600(AUD794m Sept 18) - BBG
- CFTC Data last week shows Asset managers slightly increasing their shorts -68333(Last -66025), the Leveraged community pulled back the shorts they had just started to rebuild -5081(Last -11860).
- AUD/JPY - Asia-Pac range 98.06 - 98.27, Asia is trading around 98.20. The pair consolidated its gains on Friday night, turning the focus back towards the 99.00/100.00 area. Dips back towards 96.50/97.00 should be expected to be supported now first up.
Fig 1: AUD CFTC Data
Source: MNI - Market News/Bloomberg Finance L.P
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AUSSIE 10-YEAR TECHS: (U5) Follows Fade in 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 @ 15:17 BST Aug 15
- 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 both the recent poor NFP print as well as Tuesday’s inflation number. While this impact faded into the close of the week, 10-year futures remain 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.
FOREX: USD Index Pinned to 50-dma as Putin Shakes Hands with Trump
- USD slipped against all others Friday, with a poor set of retail sales and Uni of Michigan sentiment numbers meeting a higher-than-expected import price index to further stimulate concerns over a stagflarionary phase in the US economy. The USD Index trades either side of the 50-dma which, notably, has begun to flatten out after maintaining a solid downtrend throughout 2025.
- JPY is the strongest currency in G10, extending the breakout and bearish conclusion of the consolidation phase in USD/JPY. Recent weakness puts the price through support drawn off the early August lows as well as 146.71, a key retracement. Price action this week marks a full reversal of the previously overbought condition, keeping the downside argument in focus.
- Anticipation ahead of the Putin-Trump meeting has reached fever pitch. Footage showing the Presidents shaking hands in Alaska has helped ease concerns over a hostile meeting, but it's the outcomes that will matter to markets - particularly as equities hold at alltime highs. Any signs of progress toward a ceasefire would be warmly received by risk sentiment - although both Trump and Putin cautioned against a optimistic outcome in comments to press.
- We noted earlier in the week the pressure building on USD/HKD, with price action not matching the pattern of HKMA intervention. That move extended overnight, and is still building at typing, putting spot down to new pullback lows of 7.8119 shortly after the European open. Overnight swap rates have surged further still Friday (hitting 1.7% at typing), well ahead of the 0.3% prevailing rate mid-week and should continue to support a recovery in HIBOR fixes ahead. Today's 1m HIBOR fixed higher by 41bps, hitting 1.45% for the highest fix since mid-May. It's these factors that should work against the HKD carry trade (selling HKD, buying USD), evident in the further tightening of the HKD forward discount today: down 975 points from as high as 1270 this month.
- Focus in the coming week shifts to Jackson Hole and Powell's comments on Friday. With the September meeting still in flux - any conviction toward tipping the board toward a rate cut at the next FOMC will be carefully watched, but it's a hawkish outturn that could be more consequential for markets, as OIS prices a near 90% chance of easing on September 17th.
MNI: US TSY TICS NET FLOWS IN JUN +$77.8B
- MNI: US TSY TICS NET FLOWS IN JUN +$77.8B
- US TSY TICS NET L-T FLOWS IN JUN +$150.8B
