AUD: Asia Wrap - AUD/USD Finds Demand On Canada Tariff Dip
The AUD/USD has had a range of 0.6556 - 0.6595 in the Asia- Pac session, it is currently trading around 0.6580, -0.12%. The pair dropped quickly on Trump's announcement of a 35% tariff on Canada, risk later stabilised as new headlines expanded that Trump will keep tariff exemption on USMCA goods and AUD clawed back nearly all of its losses. The AUD outperformed across the board overnight and might point to some reduction of the market shorts it has been running, the CFTC data next week should offer a clue. Can the AUD/USD now break above 0.6600 and gain the momentum it needs to build for a bigger move higher back towards 0.6900/0.7000.
- (Bloomberg) -- “Risk Stabilizes, Trump Will Keep Tariff Exemption On USMCA Goods: Risk sentiment has stabilized to a degree post the earlier Trump headlines around a 35% tariff on Canada. Subsequent headlines from US officials noted that Trump will keep the tariff exemption for USMCA goods.”
- 'PRICED: IFC A$300 Million Tap of May 2030 Kangaroo Social Bond' -BBG
- The AUD/USD continues to hold above its support around 0.6500, looks like it's back to the 0.6500 - 0.6600 range and it should now take its cues from the USD. Watching to see if the market can build on this outperformance and break above 0.6600.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6650(AUD599m), 0.6700(AUD 315m). Upcoming Close Strikes : 0.6560(AUD631m July 15), 0.6495(AUD611m July15), 0.6700(AUD611m July 16).
- CFTC Data shows last week Asset managers pared back their shorts slightly -35992, the Leveraged community maintained their shorts -22903.
- AUD/JPY - Today's range 95.98 - 96.81, it is trading currently around 96.70, +0.40%. The pair has again tested above 96.00 and this time looks to be building real momentum to extend higher. The market has been caught wrong-footed in both legs of this pair and price action suggests a potential move back to 99.00/100.00.
Fig 1: AUD/USD spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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GOLD: Firmer, But Tracking Within Recent Ranges
Gold has ticked higher in the first part of Wednesday trade, last near $3341-42/oz, up around 0.50% versus end Tuesday levels in the US. This comes despite an uptick in the USD, with the BBDXY index around 0.1% stronger so far today. Focus has been firmly on US-China trade talks, with headlines from London crossing earlier. The market reaction has been fairly muted, with the main outcome being agreement to move forward with what was agreed at the Geneva talks in May (although both US and China leaders need to sign off on implementation).
- US equity futures have edged down, with the market perhaps looking for something more around broader tariff relief. This may be helping gold at the margins, although most regional equity markets in Asia Pac are firmer in Tuesday trade.
- For gold techs, the bullish theme remains intact with moving-average studies staying in a bull mode. Initial resistance is at $3403.5, 5 June high with the bull trigger at $3500.1. Initial support is at $3242.4, 50-day EMA.
NZD: Asia Wrap - Drifts Lower, Holds Above 0.6000
The NZD/USD had a range of 0.6025 - 0.6062 in the Asia-Pac session, going into the London open trading around 0.6035. The NZD has drifted lower for most of our session as US stocks fail to push on after positive headlines on the conclusion of the US-China talks. The NZD has looked to be building for an extension higher, CPI tonight will determine if this can come to pass.
- Bloomberg - “New Zealand's annual net immigration fell to 21,317 in April, a two-and-a-half year low, which could slow the country's economic recovery and lead to more interest-rate cuts.”
- “The decline in net immigration is partly driven by New Zealand citizens leaving the country to seek better incomes, which could dampen demand and prompt the Reserve Bank to provide policy stimulus.”
- The NZD continues to find demand back towards the 0.6000 area as dips remain well supported, bulls will be hoping this holds to have another crack at extending higher.
- The support back towards 0.5850 has held very well, and while this continues to hold expect buyers to be around on dips. A clear break above 0.6050/0.6100 could provide the spark for the next leg higher. The market remains short and above here they could be forced to pare back.
- CFTC Data showed Asset managers maintaining their shorts, while the leverage actually added to their shorts last week.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6100(NZD353m), 0.6145(NZD348m). Upcoming Close Strikes : none
AUD/NZD range for the session has been 1.0769 - 1.0793, currently trading 1.0790. A top looks in place now just above 1.0900, the cross topped out on Monday towards the 1.0800/25 sell area, the first target looks to be around 1.0650.
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
CHINA: Bond Futures Up Modestly
- China's bond futures all rose today as the Central Bank withdrew liquidity during the OMO
- The 10YR future is up +0.04 to 109.025 and remains above all major moving averages. The nearest the 20-day EMA is at 108.83
- The 2YR future is up +0.01 at 102.44 and sits just above the 20-day EMA of 102.43
- The CGB10YR is marginally better today at 1.68%
