AUD: Asia Wrap - AUD/USD Finds Some Demand Towards 0.6500
The AUD/USD has had a range of 0.6512 - 0.6534 in the Asia- Pac session, it is currently trading around 0.6525, +0.18%. The USD has surged higher on the back of the US CPI showing clear signs that tariffs are beginning to impact the core goods data. US yields and the USD have both reacted as the market further reduces rate cut expectations for the year. This has seen currencies take a hit across the board, the AUD/USD has fallen quickly back to the lower end of its recent 0.6500/0.6600 range, its fortunes clearly tethered to the USD and if it can continue to pressure a short market then the AUD/USD could probe its support just below 0.6500. A Sustained break through this level opens up the potential for a further pullback towards the 0.6350 area.
- “The Australian dollar was bought by exporters ahead of Thursday’s local jobs report, according to Asia-based FX traders.” - BBG
- (Bloomberg Economics) -- Australia’s labor market report for June is likely to show a lift in jobs and a slight increase in the unemployment rate. We expect a 20k increase in jobs, after a weaker-than-expected 2.5k decline in May.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6550(AUD452m), 0.6575(AUD670m). Upcoming Close Strikes : 0.6480(AUD786m July18), 0.6500(AUD639m July 21), 0.6600(AUD725m July 21)
- CFTC Data shows Asset managers added to their shorts slightly -38252, the Leveraged community pared back their shorts to -19061..
- AUD/JPY - Today's range 96.94 - 97.24, it is trading currently around 97.20, +0.25%. The pair has had a good move above 96.00 and looks to be building 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. With the risk backdrop souring it is unusual to still see this pair so well bid, this continues to point to a market that is paring back positioning. A Deeper correction in risk though would start to provide headwinds to further gains.
Fig 1: AUD/USD spot Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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GOLD: Off Earlier Highs, But Uptrend Remains Intact
Gold made highs of $3451.31 in the first part of trade, but we sit lower now, last back close to $3431, down slightly from end levels last week. Early gains were driven by the spike in oil from the open, which contributed to softer US equity futures. Sentiment has stabilized somewhat though, with US equity futures back modestly in the green. The USD has also ticked up against the majors, likely providing an additional headwind to gold.
- Still, recent gains reinforce the bullish trend with the bull trigger at $3500.1. Moving average studies are in a bull mode and highlight a dominant uptrend. Further risk off episodes can't be ruled out, with the on-going Israel-Iran conflict.
- Continued pessimism towards the USD should also support gold demand.
- On the downside, note the following support: $3325.3/3249.9 - 20- and 50-day EMA.
NZD: Asia Wrap - Quiet Asian Session
The NZD/USD had a range of 0.6004 - 0.6026 in the Asia-Pac session, going into the London open trading around 0.6010. A very quiet session for the NZD, it continues to cling to its foothold above 0.6000.
- NZ Data - Slower Growth Expected But Inflation Eases To Band Mid-Point. The NZIER June survey of forecasters has been published and is showing a downward revision to NZ growth this financial year and next compared with the March results. FY25 is down 0.3pp to 1.1% and FY26 0.2pp to 1.9%, the recovery remains in place supported by lower rates.
- BNZ Indices Signal Economic Slowdown & Job Shedding. BNZ’s manufacturing and services PMIs both deteriorated in May and are below the breakeven-50 level and senior economist Steel warned that they are consistent with a return to a recession. With rates now in the “neutral zone” and the RBNZ Governor Hawkesby saying the MPC doesn’t have a bias, it looks like the RBNZ will be on hold on July 9 as it waits for more data, but it does monitor these indices and they suggest that the meeting will be “live”.
- The USD’s muted reaction to the events on Friday have the market again questioning the role it has as a safe haven ?
- The NZD continues to find solid support around the 0.6000 area. The upward momentum though has stalled for now and the market will be watching if risk can continue to hold up as impressively as it did on Friday night.
- While the support around 0.5850 holds in NZD/USD there should be buyers around on dips. A clear break above 0.6050/0.6100 and the move could start to accelerate.
- CFTC Data showed Asset managers paring back their shorts slightly over the week, the leverage community did likewise.
AUD/NZD range for the session has been 1.0761 - 1.0798, currently trading 1.0770. A top looks in place now just above 1.0900, the cross topped out last week towards the 1.0800/25 sell area, the first target looks to be around 1.0650.
Fig 1: NZD CFTC Data
- Source: MNI - Market News/Bloomberg Finance L.P
CHINA: Bond Futures Rise
- China's bond futures are all higher today as the data suggests that any momentum in house prices and property investment may be stalling.
- The 10Yr future is up +0.03 at 109.03 and remains above all major moving averages. The nearest being the 20-day EMA at 108.88
- The 2Yr future is up +0.02 at 102.47 and is at the mid-point of the 20-day EMA at 102.43 and the 50-day EMA at 102.50
- The 10YR CGB is marginally lower in yield today at 1.69%
