AUD: Asia Wrap - AUD/USD Drifts Lower

• The key Chinese bond futures are moving in opposite directions today, albeit modestly.  
• The 10yr future is down -0.02 at 108.71 and sits atop the 200-day EMA of 108.70 which it hasn't trade below since late May. 

• The 2-year future is up +.01 to 102.42 and remains below all major moving averages.  The nearest being the 20-day EMA of 102.44.
• The 10yr CGHB is at at 1.68% in this morning's trading.  

The AUD/USD has had a range of 0.6514 - 0.6531 in the Asia- Pac session, it is currently trading around 0.6520, -0.08%. The pair drifted higher overnight as the USD came back under pressure with US yields pushing lower. The follow through below 0.6500 was quite disappointing for AUD shorts but with Stocks making new highs and risk outperforming, it makes it a hard environment for AUD/USD to collapse in. The Pair looks to be consolidating in a 0.6450 - 0.6600 range as the market awaits a catalyst to provide clearer direction.

• The RBA's July meeting minutes show the Board focused on the timing and extent of any further rate cuts. While they agreed the inflation outlook supports some easing over time, most members felt a third cut at this stage would be inconsistent with their cautious and gradual approach. The stance of monetary policy is still considered modestly restrictive, and the Board wants greater confidence that inflation is heading sustainably toward the 2.5% target.
• Gavekal - “China’s government promised more fiscal stimulus this year as well as a different type of stimulus: a shift away from previous years' heavy reliance on low-return infrastructure projects. But bond sales data show a modest shift, partly towards support for the property market and financial stability.”
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6550(AUD596m), 0.6500(AUD496m) . Upcoming Close Strikes : none - BBG
• CFTC Data shows Asset managers have maintained their shorts -38267, the Leveraged community added slightly to their shorts to -20048.
• AUD/JPY - Today's range 96.03 - 96.37, it is trading currently around 96.15, +0.01%.   The pair continued to trade heavily overnight. The support is seen between 95.00 - 96.00, demand on dips should materialise first up.

Fig 1: AUD/JPY spot 120min Chart

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

The TYU5 range has been 111-03 to 111-06 during the Asia-Pacific session. It last changed hands at 111-05, down 0-01 from the previous close. 

• The US 2-year yield has edged lower trading around 3.854%, down 0.01 from its close.
• The US 10-year yield has moved lower trading around 4.37%, down 0.01 from its close.
• The 10-year yield has moved back towards its pivot within the wider range 4.10% - 4.65%, expect supply around 4.35% first up.
• Treasury Secretary Scott Bessent on X: “Today in a CNBC interview, I called for a review of the Federal Reserve. It is my belief that the central bank should conduct an exhaustive internal review of its non-monetary policy operations. Significant mission creep and institutional growth have taken the Fed into areas that potentially jeopardize the independence of its core monetary policy mission.”
• “While I have no knowledge or opinion on the legal basis for the massive building renovations being undertaken on Constitution Avenue, a review of the decision to undertake such a project by an institution reporting operating losses of more than $100 billion per year should be conducted.”
• 2WAY on X: “Donald Trump’s appointment of Jerome Powell to the Federal Reserve “was probably a mistake,” says the economist Stephen Moore. “But I don't think Trump is going to replace Powell. I think he'll wait him out. He may name his successor sometime in the next month or two or three, just to put pressure on him. There's no love loss between those two right now. It's like they want a divorce from each other.”
• Data/Events: Philly Fed Non-Man., Richmond Fed Manu. Index & Business Conditions

Fig 1: 10-Year US Yield Daily Chart

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