NZD: Asia Wrap - NZD/USD Demand Seen Just Below 0.6000
The NZD/USD had a range of 0.5995 - 0.6021 in the Asia-Pac session, going into the London open trading around 0.6015, +0.32%. The pair has drifted higher for most of our session as the market tries to view the Europe trade deal as a potential playbook and hopes that the Aug.1 deadline has not been set in stone. US Equity futures turned positive after opening lower in Asia, ESU5 +0.04%, NQU5 +0.20%. We have seen this ‘movie’ before and it normally ends with the USD faltering and moving lower again, is this time different ? The NZD found support again around the 0.6000 area as it tries to build a base from which to move higher, a sustained break below here though would risk a deeper correction back to 0.5850/0.5900.
- MNI RBNZ Preview-July 2025: Likely On Hold. The sell-side consensus is for the RBNZ to remain on hold tomorrow, which is also consistent with market pricing. There are some sell-side forecasters looking for a rate cut tomorrow, whilst most of those who see the RBNZ on hold, see risks of further cuts as we progress through 2025. For this meeting, our own bias is for the central bank to hold policy rates steady.
- RBNZ dated OIS pricing is little changed across meetings today, ahead of tomorrow's RBNZ Policy Decision. 3bps of easing is priced for this week's meeting, with a cumulative 32bps by November 2025.
- The NZD/USD has lost all its upward momentum and is back testing its support around the 0.6000 area. If risk has a deeper correction and the USD can find some upward momentum the risk is a move back towards the 0.5850/0.5900 area.
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.6075(NZD519m July 9), 0.6000(NZD407m July 10), 0.6025(NZD373m July10).
- CFTC Data shows Asset Managers have reduced their newly built longs in NZD +8515, the Leveraged community reduced their short last week -8424.
- AUD/NZD range for the session has been 1.0820 - 1.0839, currently trading 1.0830. The cross is struggling to get any momentum for now. It looks to be in a 1.0750 - 1.0850 range for now as it awaits a catalyst to provide some direction. Can the RBA today and RBNZ tomorrow give this pair the energy it needs to move higher again ?
Fig 1: NZD/USD Spot Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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JGB TECHS: (M5) Rallies Off Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.19 @ 15:53 GMT Jun 06
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US TSYS/SUPPLY: MNI UST Issuance Deep Dive: June 2025
We've just published our UST Issuance Deep Dive - Download Full Report Here
- May’s refunding round saw guidance as well as coupon sizes for the current quarter unchanged.
- The August round (Jul 28-30) could prove more compelling, reflecting both pressure at the long end of the Treasury curve as well as a shifting fiscal outlook amid tariff revenues contrasted with impending tax cuts (not to mention the likelihood of approaching the debt limit at around that time if it’s not lifted).
- Future Coupon Upsizing: We’ve seen some expectations that Treasury could lean against some of those trends in the August refunding, with potential signals if not immediate action on adjusting buybacks or even reducing issuance duration in order to reduce pressure on the long end. MNI’s current expectation is that coupon sizes will only be increased in early 2026. We will update in our next Deep Dive at end-June, with our full refunding preview coming in late July.
- Upcoming issuance: June is set to see $315B in nominal Treasury coupon sales, in addition to $23B in 10Y TIPS and $28B FRN for a total of $366B. Sales for the month start in the coming week, on Tuesday June 10 with $58B of 3Y Note, Wednesday June 11 with $39B of 10Y Note, and Thursday June 12 with $22B of 30Y Bond.
- May Auction Results: Against a backdrop of continued steepening pressure for global sovereign curves, May’s coupon auctions saw strong sales at the short-end/belly contrasted with tails at the long-end.
US FISCAL: Extraordinary Treasury Measures Tick Up As Cash Depletes
Treasury had $84B in "extraordinary measures" available to keep the government financed as of June 4 per a release Friday. That is up from $68B a week earlier though Treasury has exhausted three-quarters of the total initially available ($362B) when the debt limit impasse began in January.
- Combined with a pullback in Treasury cash ($376B), the total resources available to avert an "x-date" in the summer are down to a total $460B, the lowest since April 10 before the annual tax take accelerated.
- There will be another uptick in Treasury cash late next week/early the following week around the mid-June tax date, but this is likely to be the last major uplift before the summer at which point x-date speculation will pick up if Congress hasn't passed a debt limit increase by then.
