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
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GOLD: Gold Falls Again as Optimism Grows
- Gold started the week lower and is trading at US$3,281.41 in afternoon trade, a decline of 1.32%.
- This morning's move sees gold breach the 20-day EMA of $3,284.60 with the 50-day EMA below at $3,162.71.
- Evidence of trade talks and the somewhat easing of tensions has taken some of the safe haven bid out of gold this morning and given the strength of last week's performance, it is likely profit taking is behind this morning's move.
- US and China reported 'substantial' progress after two days of talks in Switzerland with markets looking for a de-escalation of a trade war that could materially lower global growth.
FOREX: Antipodean Wrap - AUD & NZD Outperform
The S&P is up 1.4% this morning after gapping on thin liquidity at the Asian open. It has held these gains remarkably well for now, with these early Monday morning moves having a habit of failing. There seems to be a view that the outcome of these talks could have significant implications going forward as China now sees itself coming to the negotiating table as a peer and not as a subordinate. Hu Xijin, former Editor-in-Chief of the Global Times, remarked in a recent Weibo post: “China has achieved the most equal negotiation with the United States among all nations. The two sides had been at loggerheads, but their first official contact yielded substantial results—an unexpected turn of events. I believe this breakthrough is precisely the result of China’s readiness to stand firm and its unwavering commitment to principle.” See this X link for more details https://x.com/ShanghaiMacro/status/1921759301284376957
- AUD/USD - Asian range 0.6410 - 0.6432, the AUD is currently dealing around 0.6435. AUD has outperformed this morning especially in the crosses. Good demand was seen on Friday sub 0.6400, on the day this could continue to provide support. A break below 0.6300 needed to reverse direction.
- AUD/JPY - Asian range 93.40 - 93.99, price goes into London trading around 93.75. While the support around 92.00 holds, price is likely to continue testing the Weekly resistance seen between 94.00/96.00 where sellers should remerge.
- NZDUSD - Asian range 0.5910 - 0.5931, going into London trading around 0.5935. On the day there is potential for NZD to continue to outperform as the market digests an outcome from the talks that many thought not possible. First support is right here around the 0.5900 area but more importantly the support around 0.5800 needs to hold to keep the bulls in the drivers seat.
- AUD/NZD - Asian range 1.0833 - 1.0859, the Asian session is currently trading 1.0845. Sellers continue to provide headwinds for the cross just above 1.0850, a sustained move back above 1.0900 would negate the bearish trend.
Fig 1 : AUD/USD Spot Hourly Chart
Source: MNI - Market News/Bloomberg
US TSYS: Asia Wrap - Yields Extend Higher
TYM5 has traded lower within a range of 110-15+ to 110-19+during the Asia-Pacific session. It last changed hands at 110-19, down 0-07 from the previous close.
- The US 2-year yield is higher, dealing around 3.91%, up 0.02 from its close.
- The US 10-year yield is higher, dealing around 4.40%, up 0.02 from its close.
- (Bloomberg) -- “Hedge funds aggressively added to net short positioning in 10-year note futures, while asset managers boosted longs in the sector in the week up to May 6, CFTC data shows.”
- Several regional small and medium-sized banks in China have lowered deposit interest rates in a bid to further reduce funding costs, according to Securities Daily. Following the adjustment, interest rates on certain banks’ three- and five-year medium- to long-term deposits have fallen below 2%. Analysts anticipate this downward trend will persist, citing ongoing pressure from narrowing interest rate spreads, the report said.
- Yields have all moved higher this morning as risk bounces on US-China officials citing 'substantial progress' made from weekend trade talks held in Switzerland.
- The 10-year Yield range seems to be 4.10% - 4.5%, price has bounced nicely off the 4.25/30 support, target back towards the top end of the range 4.45/50%.
- Data/Events : US CPI Tomorrow
