FOREX: Asia Wrap - Market Quick To Sell USD's Again

After falling almost 2% on Tuesday, gold prices are moderately higher during today’s APAC session on concerns over a deterioration in the situation in the Middle East following CNN reports that Israel is considering a strike on Iran’s nuclear infrastructure. Bullion has range traded though reaching a high of $3314.69 followed by a low of $3285.50 and is now 0.4% higher at $3304.50/oz to be little changed in May. 

• Technicals continue to be consistent with a corrective bear cycle, but today gold held above initial resistance at $3256.6, 20-day EMA, opening up $3347.5, 9 May high. Moody’s downgrade of US sovereign debt has encouraged flight-to-quality buying this week. Initial support is at $3121.0, 15 May low.
• Apparently Israel is yet to decide on whether to attack Iran and the likelihood looks to depend on what it thinks of US-Iran nuclear talks, as it won’t be happy if Iran retains any ability to refine uranium, according to CNN.
• Equities are generally stronger with the Hang Seng up 0.5% and KOSPI +1.0% but S&P e-mini down 0.4%. Silver is off its intraday low of $32.93 but is currently little changed on the day at $33.08. Oil is higher with WTI up 1.9% to $63.21. Copper is +0.7% and iron ore just under $100/t. The USD index is down 0.4%.
• Later the Fed’s Barkin and Bowman and ECB’s Lane appear. The ECB’s May Financial Stability Review is published. UK April CPI is released and likely to show impacts from government policy changes.

The Asia-Pac range has been 143.73 - 144.61, Asia is currently trading around 143.75. USD/JPY has been under pressure from the open and remained so all through our session as the USD took another leg lower across the board.

• (Financial Times) -- ‘Yields on the longest-dated Japanese government bonds surged to record highs on Tuesday after a dismal debt auction added to investor fears of a lack of demand.”
• Reuters - “BOJ urged to boost bond buying in wake of spike in super-long yields “reut.rs/3S9aspw
• The JGB 30-Year yield extended higher again to print 3.201% up 0.09 on the day. This is starting to look pretty ugly, at what level do the Japanese Lifers sell US assets and repatriate funds to buy this? This has implications for both US stocks and bonds.
• USD/JPY is breaking through its support and the price action is interesting considering the bounce we have had in stocks recently.
• The price action shows the market is still more comfortable selling rallies. If we close down at these levels on the day focus will turn once more to the pivotal 140.00 area.

• Options : Closest significant option expiries for NY cut, based on DTCC data: 145.50($1.03b May 20), 145.00($789.7m May 20) , Upcoming Strikes : 145.00($2b May 23),144.00($1.37b May 23), 140.00(1.67b May 23)

  Fig 1 : USD/JPY Spot Daily Chart

  

  Source: MNI - Market News/Bloomberg

The NZD/USD had a range of 0.5919 - 0.5950 in the Asia-Pac session, going into the London open trading around 0.5945. The USD has come under pressure straight from the opening this morning and has remained heavy across the board all through our session the NZD has benefited from this.

• MNI - RBNZ: " Business expectations for annual CPI inflation increased across all time horizons. Mean one-year-ahead annual inflation expectations increased from 2.25% to 2.44%. Mean two-year-ahead inflation expectations increased from 2.47% to 2.54%. Mean five-year-ahead and ten-year-ahead inflation expectations increased to 3.06% and 3.94%, respectively. "
• MNI China Press - "The Shanghai Port U.S. West Line for mid-June shipment has reached USD9,100 per 40-foot container, a sharp increase from the USD2,250 offered in early May, Yicai news outlet reported, citing industry insiders.”
• The NZD/USD has been bid all of our session as the USD extended its sell-off after the NZD found some decent demand sub 0.5900 overnight
• The NZD now seems to be comfortable in a 0.5800/0.6050 range and awaits a catalyst to provide the impetus to break-out.
• The support back towards 0.5800 has held very well, and while this continues to hold expect buyers to be around on dips. The first target is the highs just above 0.6000, a break above here could signal a bigger move higher is about to unfold.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5875(NZD349.6m), Upcoming Strikes : 0.5705(NZD805.1m May 23), 0.6150(NZD356.1m May 23), 0.5980(NZD513.4m May26)

• AUD/NZD range for the session has been 1.0833 - 1.0851, currently trading 1.0840. The Cross has found some supply just above 1.0900, support is seen back towards 1.0800. A sustained break above 1.0920 is needed to turn the focus higher, until then expect supply on bounces.

  Fig 1: NZD/USD Spot Daily Chart

  

  Source: MNI - Market News/Bloomberg