NZD: Asia Wrap - Can NZD/USD Hold Above 0.6000 With Risk Breaking Down
The NZD/USD had a range of 0.6004 - 0.6070 in the Asia-Pac session, going into the London open trading around 0.6020. The NZD has been under large pressure for most of our session as the risk-on move unravels on the back of a wave of airstrikes currently being carried out on Iran. The knee-jerk move lower in risk currencies like the AUD and NZD was swift and has continued to trade heavy while risk looks like its correction could have more to play out. The NZD is still trying hard to hold above its 0.6000 support, if risk falls further can it continue to do so ?
- '*RBNZ NOWCAST ESTIMATE OF NEW ZEALAND 1Q GDP GROWTH IS 0.63%" - BBG
- Manufacturing PMI Slumps In May, Giving Back 2025 Gains : New Zealand's BusinessNZ manufacturing PMI fell sharply in May to 47.5 from a revised 53.3 print for April. This largely unwinds all of the improvement seen in the first part of 2025. The index was at 46.5 in Dec 2024.
- The NZD’s inability to accelerate above 0.6050 could see the move higher stall in the short term, first support is seen back towards the 0.5950 area. How the USD trades on this news will be key to how we move forward from here, can it bounce with oil and as a safe haven ? If not what is that telling us.
- While the support around 0.5850 holds there should be buyers around on dips. A clear break above 0.6050/0.6100 is needed to provide the spark for the next leg higher.
AUD/NZD range for the session has been 1.0746 - 1.0774, currently trading 1.0770. 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
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US TSYS: Cash Bonds Little Changed After Yesterday's Tame CPI
TYM5 is dealing at 110-04, +0-05 from closing levels in today's Asia-Pac session.
- According to MNI’s technicals team, Treasury futures maintain a softer tone following recent weakness. Support at 110-01+, a Fibonacci retracement point, has been broken. Clearance here strengthens a bearish theme and exposes a key support at 109-08, the Apr 24 low. Key near-term resistance has been defined at 111-22, the May 7 high. A break of this level is required to signal a potential reversal.
- There has been no net movement in cash US tsys in today's Asia-Pac session after being little changed yesterday following the tame April CPI report.
- The 10-year yield range seems to be 4.10% - 4.50%, with the yield currently testing the upper bound of this range. A sustained break above this level would see another round of selling targeting the 4.75% area.
- Data: US MBA Mortgage Applications
STIR: RBNZ Dated OIS Pricing Firms Since CPI But Much Less Than AUS
RBNZ-dated OIS pricing is flat to 3bps firmer across meetings today, leaving rates 2–14bps above levels seen prior to the Q1 CPI release on April 17.
- Q1 New Zealand CPI came in hotter than expected at 0.9% q/q, lifting the annual rate to 2.5% from 2.2% in Q4. Both tradeables and non-tradeables components contributed to the upside surprise.
- However, the RBNZ’s preferred measure of underlying inflation—the sectoral factor model—edged lower to 2.9% in Q1, down from a downwardly revised 3.0% in Q4. This marks the lowest print since Q2 2021 and places core inflation just under the top of the RBNZ’s 1–3% target band.
- In Australia, Q1 headline and underlying CPI exceeded expectations by 0.1pp, although the trimmed mean slowed to 2.9% y/y, falling within the RBA’s target band for the first time since Q4 2021.
- For comparison, RBA-dated OIS pricing is now 4–40bps firmer than pre-Q1 CPI levels recorded on April 30.
Figure 1: RBNZ Dated OIS Current vs. Pre-CPI Levels (%)
Source: MNI - Market News / Bloomberg
CHINA: Bond Futures Lower in Morning Trade
- China's bond futures are all lower in morning trading.
- The 10YR future is lower by -0.10 at 108.56 and has breached the 50-day EMA of 108.59. The next key level below is the 100-day EMA of 108.32.
- The 2YR future is lower by -0.05 at 102.46 and remains firmly below all major moving averages. The nearest being the 20-day EMA at 102.46.
- CGB bond yields are stable with the CGB 10YR at 1.66%
