NZD: Asia Wrap -NZD/USD Can't Hold Onto Early Gains
The NZD/USD had a range of 0.6011 - 0.6033 in the Asia-Pac session, going into the London open trading around 0.6011, -0.10%. The pair traded with a heavy tone all through Friday but has attempted to bounce this morning as the market gets news of a US-EU trade deal. Price will need a sustained break back above the 0.6050/0.6100 area to signal a potential base might be in place. There is lots of event risk coming up this week and we are also heading into the corporate month-end so there could be a demand for USD’s starting today but the flow is more likely to be executed tomorrow.
- NEW ZEALAND: Labour Market Remained Weak In Q2. June filled jobs rose a lacklustre 0.1% m/m but down 1.1% y/y following a downwardly-revised -0.1% m/m & -1.7% y/y. This left Q2 down 0.3% q/q and -1.6% y/y after -0.1% & -1.7% in Q1, suggesting that while the pace of deterioration has slowed, the labour market continues to struggle. Q2 labour data is published on August 6 and this data implies (there is a 50% correlation between quarterly rates) that employment may have fallen again after rising 0.1% q/q in Q1, which would increase the chance of an August rate cut.
- (Bloomberg) -- New Zealand farmers are more confident about current economic conditions but less optimistic about the future, according to a survey conducted by Federated Farmers.
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.6000(NZD395m July 30), 0.5965(NZD424m July 31). - BBG
- CFTC Data shows Asset Managers again reduced their newly built longs in NZD +5034(Last +8192), the Leveraged community added slightly to their shorts last week -7328(Last -6744).
- AUD/NZD range for the session has been 1.0914 - 1.0933, currently trading 1.0925. The cross moved higher in response to the NZ CPI. Dips back to 1.0850/1.0900 should continue to find support as the pair tries to build momentum to move higher.
Fig 1: NZD CFTC Data
Source: MNI - Market News/Bloomberg Finance L.P
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US FISCAL: Available "Extraordinary" Measures To Ward Off X-Date Pick Up
Treasury reported Friday that as of Jun 25 it had $130B in remaining "extraordinary" measures (of a total $378B available) to ward off an "x-date" of running out of resources before defaulting. That's the highest in 2 weeks.
- Combined with $334B cash as of Jun 25 (after a bit of a buildup after the mid-June tax deadline), that's a total of roughly $465B in total resources available.
- We noted earlier this week that Treasury told Congress that it was required to extend its debt issuance suspension period from Jun 27 to Jul 24, in effect prolonging the use of extraordinary measures while we await a resolution to the debt limit impasse, probably through the fiscal legislation currently going through Congress.
- Realistically, fiscal dynamics so far this year point to potential for Treasury to get into September without running out of cash + extraordinary measures. That seems to be the broad market expectation.
US DATA: Cleveland, Dallas Fed PCE Medians Show Progress But Still Above-Target
The Cleveland and Dallas Fed's median PCE metrics showed a notable drop in May. All indices suggest PCE inflation running above 2%, and higher than the actual core and headline PCE measures, but pressures appear to have cooled from a pickup in the early months of the year.
- The Cleveland Fed's median PCE measure came in at 0.22% M/M, a 10-month low after April's 15-month high 0.31%. This left median PCE at 3.01% on a Y/Y basis, down from 3.06% prior for a the joint-lowest (with Feb) since September 2021.
- The Dallas Fed's annualized median rate fell to 2.01%, from 2.65% prior for a 10-month low. The 6-month annualized rate edged lower to 2.74% (2.76% prior), a 4-month low, with the Y/Y rate ticking down to 2.55% from 2.56%, echoing the Cleveland Fed for the lowest reading since September 2021.
USDCAD TECHS: Pivot Resistance Remains Intact
- RES 4: 1.4111 High Apr 4
- RES 3: 1.4016 High May 12 and 13 and a key resistance
- RES 2: 1.3920 High May 21
- RES 1: 1.2710/3803 20- and 50-day EMA values
- PRICE: 1.3658 @ 16:23 BST Jun 27
- SUP 1: 1.3618 Low Jun 26
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
USDCAD has pulled back from its recent highs. The primary downtrend remains intact and short-term gains appear to have been corrective. Key support and the bear trigger has been defined at 1.3540, the Jun 16 low. Clearance of this price point would resume the downtrend. Any reversal higher would instead signal scope for a stronger retracement. Pivot resistance to monitor is at the 50-day EMA, at 1.3803.
