NZD: Asia Wrap - NZD/USD Trades Heavy Still, Just Above 0.5800 Support

While oil markets are off their highs following the announcement of a US-Japan trade deal, they are still up today but continue to range trade. WTI is 0.4% higher at $65.54/bbl after reaching $65.82 earlier, while Brent is +0.3% to $68.77/bbl following a peak of $69.10. The USD index is slightly higher.

• US imports from Japan, including autos, will face a 15% tariff down from the 24% announced in April but higher than the current average below 5%. This lower rate is in exchange for $550bn of Japanese investment in the US.
• Attention remains on negotiations with the EU and China. Treasury Secretary Bessent is scheduled to meet China officials in Stockholm next week with the aim of extending the current hold on tariffs beyond August 12. The talks may also include China’s continued consumption of Russian and Iranian crude.
• Industry-based data showed a small US crude inventory drawdown with a larger one for gasoline but distillate was higher. The official EIA data is out later today and while the supply/demand balance remains a concern is likely to be a focus.
• Malaysia has decided not to cut fuel subsidies and the price of RON95 fuel will actually fall to MYR 1.99/L as part of a package to support households.
• Later June US existing home sales and preliminary July euro area consumer confidence print. 

The Asia-Pac USD/JPY range has been 146.20 - 147.20, Asia is currently trading around 147.00, +0.25%. USD/JPY continues to frustrate the market and has given back a large portion of its recent gains, around 250 points in 2 days. The move lower in US yields is providing serious headwinds for the pair and the USD seems to be floundering in all scenarios. We are probing the first support around 146.50 this morning where some demand should be seen first up as the market digests the trade deal with the US, next level is the pivotal 144.00/145.00 area.

• Kelly Eckhold(Westpac) on LinkedIn: “Trump trade deals progressing. Japan interestingly opens up the rice market in exchange for their tariff being reduced to 15%. That’s a huge change for Japan where rice imports have not been allowed.”
• "ISHIBA: DEAL WON'T SACRIFICE JAPAN AGRICULTURE AT ALL, WILL INCREASE US RICE IMPORTS WITHIN EXISTING BRACKET" - BBG
• MNI: BOJ's Uchida - Gradual Rate Hike, But No Pace Signalling. TOKYO - Bank of Japan Deputy Governor Uchida stated on Wednesday that the central bank will maintain its approach of gradually raising the policy interest rate, citing persistently low real interest rates. However, he offered no guidance on the timing or pace of future rate hikes, citing elevated levels of uncertainty.
• JAPAN Local Media States PM Ishiba To Resign In August : Headlines have crossed from local newspaper Mainichi that PM Ishiba will resign by the end of August. Via Rtrs: "Japan's Prime Minister Shigeru Ishiba has made up his mind to resign, Mainichi newspaper reported on Wednesday." A later headline from the Yomiuri newspaper reported he may announce resignation as soon as this month.
• "JAPAN 40-YEAR BOND BID-COVER RATIO 2.13 VS 12-MONTH AVG 2.48, SALE DRAWS WEAKEST DEMAND RATIO SINCE 2011, BOND FUTURES HOLD LOSS AFTER 40-YEAR DEBT AUCTION" - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 146.00($734m), 148.00($902m).Upcoming Close Strikes : 147.50($1.5b July 24), 145.00($1.15bm July 25) - BBG.
• CFTC data shows Asset managers starting to reduce JPY longs more aggressively +71610, while leveraged funds have started to build into a new short JPY position -12606.

Fig 1 : USD/JPY Spot 120min Chart

Source: MNI - Market News/Bloomberg Finance L.P

The AUD/USD has had a range of 0.6548 - 0.6569 in the Asia- Pac session, it is currently trading around 0.6565, +0.15%. The pair pushed higher in the New York session as the USD came back under pressure with US yields pushing lower. The follow through below 0.6500 was quite disappointing for AUD shorts but with Stocks making new highs and risk outperforming, it makes it a hard environment for AUD/USD to collapse in. The pair looks to be consolidating in a 0.6450 - 0.6600 range as the market awaits a catalyst to provide clearer direction.

• AUSTRALIA DATA: Westpac Lead Indicator Signals Around Trend Growth. The Westpac lead indicator for June fell 0.03% m/m following an upwardly-revised 0.05% rise. The 6-month rate, which leads detrended growth by 3 to 9 months, is hovering just above zero signalling that growth is likely to return to around trend towards year end. Westpac believes that sluggish growth and the Q2 CPI outcome on July 30 will enable the RBA to cut 25bp on August 12 but it will maintain a “gradual easing cycle”.
• (Bloomberg) -- Australia’s economy will expand 0.5% in 2Q, according to the latest median estimate from a Bloomberg News survey conducted from July 17 to July 22.
•  "AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY - KEEPS ITS MACROPRUDENTIAL POLICY SETTINGS STEADY" - RTRS
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6525(AUD603m), 0.6500(AUD445m), 0.6580(AUD403m) . Upcoming Close Strikes : none - BBG
• CFTC Data shows Asset managers have maintained their shorts -38267, the Leveraged community added slightly to their shorts to -20048.
• AUD/JPY - Today's range 95.85 - 96.55, it is trading currently around 96.45, +0.35%.   The pair continued to trade heavily overnight. The support has held between 95.00 - 96.00, demand has materialised first up, and the trade deal between the US and Japan should provide it with some tailwinds initially.

Fig 1: AUD/JPY spot 120min Chart

Source: MNI - Market News/Bloomberg Finance L.P