AUD: Asia Wrap - Disappointing Retail Data Finds Bids Around 0.6560

The AUD/USD has had a range of 0.6433 - 0.6473 in the Asia- Pac session, it is currently trading around 0.6455. The AUD popped higher as the USD and US Equity futures came under pressure from a combination of increased trade tension between the US and China and the rise in geopolitical risk as Ukraine launches an unprecedented attack deep inside Russia.

• AUSTRALIA DATA: "S&P Global Australia May Manufacturing PMI 51 vs 51.7 Prior" - BBG
• "Australia’s inflation gauge fell 0.4% from a month earlier in May bringing annual rate 2.6% y/y from 3.3%, according to the Melbourne Institute Monthly Inflation Gauge and Cost of Living report." - BBG
• “Ukraine attacked Russian airbases with drones destroying 40 bomber planes, according to the BBC. It appears in response to larger Russian attacks on Ukraine recently including Kyiv. Talks are due to start Monday.”(BBG)
• The AUD has struggled to hold onto its early gains and has underperformed in the crosses as US Equity futures stay under pressure.
• Expect buyers to continue to be around on dips while the support in the AUD holds, a close back below 0.6300/50 would start to challenge the newly formed uptrend. A break above 0.6550 and the move higher could begin to accelerate.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6400(AUD586m), 0.6425(AUD454m), 0.6575(AUD445m). Upcoming Close Strikes : 0.6490(AUD 787m June 5)
• CFTC Data shows Asset managers pared back their shorts ever so slightly, the Leveraged community though added to their shorts quite aggressively over the week.

• AUD/JPY - Today's range 92.53 - 92.85, it is trading currently around 92.60. Range looks 92.00 - 94.00 for now, a sustained break sub 91.50/92.00 will bring focus back to towards the lows again.

  Fig 1: AUD CFTC Data

  

  Source: MNI - Market News/Bloomberg

Gold is benefiting from safe haven flows today after a deterioration in the geopolitical picture with US President Trump announcing a doubling of tariffs on steel & aluminium from Wednesday and saying that China had broken the conditions of the trade truce, which China has rebuked. Also increased defence spending was discussed at a security conference in Singapore, while Ukraine attacked Russian airfields. The USD and US yields are little changed.

• Gold prices fell 0.9% to $3289.25/oz on Friday to be flat in May. It hasn’t unwound all of Friday’s loss today though with bullion up 0.7% to $3313.3 and off the intraday high of $3316.77 made early in the session. A bullish theme remains intact but gold is trading between initial resistance at $3365.9, 23 May high, and support at $3213.6, 50-day EMA.
• Ukraine attacked Russian airbases with drones destroying at least 40 bomber planes, according to the BBC. It appears to be in response to larger Russian attacks on Ukraine including Kyiv. Talks are due to take place today.
• The pullback in risk is also reflected in today’s equity sell off with the S&P e-mini down 0.5% and the Hang Seng -2.2%. China is closed for a holiday. Oil prices are higher though with WTI +2.9% to $62.54/bbl. Copper is 3.9% higher but iron ore is lower at around $96/t. Silver is +0.2% to $33.06.
• Later the Fed’s Logan, Goolsbee and Chair Powell appear as well as ECB President Lagarde, BOE’s Mann & Greene. US May manufacturing PMI/ISM and April construction and European May manufacturing PMIs print. The focus this week will be on Friday’s US payrolls. 

The TYM5 range has been 110-22 to 110-30 during the Asia-Pacific session. It last changed hands at 110-25, up 0-01 from the previous close.

• The US 2-year yield is unchanged, trading around 3.9%, unchanged from its close.
• The US 10-year yield is a little higher, trading around 4.414%, up 0.01 from its close.
• This has seen the yield curve steepen in Asia - 2s10s +1.17 at 50.843, 5s30s +1.71 at 98.14.
• (Bloomberg) -  “Federal Reserve Governor Christopher Waller said he continues to see a path to interest-rate cuts later this year amid his expectations that tariffs will boost unemployment and temporarily increase inflation.”
• “Asset managers heavily unwound net long positioning in Treasury futures, with positioning in ultra-long bond futures heavily cut in the week ending May 27, CFTC data show. Hedge funds covered short positions across the curve, taking the other side, with a big short unwind seen in ultra-long bonds.”(BBG)
• AFR via BBG - “JPMorgan chief executive Jamie Dimon on Friday night predicted that a crack in the bond market is “going to happen” - and it will scare the pants off everyone.”
• The 10-year has come back down to test its support around 4.35/40%, likely aided by month-end rebalancing. Yields need to hold above this area to continue to build for a move higher. 
• Data/Events : S&P Global US Man PMI, ISM Man, Powell to talk.