JPY: Asia Wrap - Quiet Session, Trades Sideways

The NZD/USD had a range of 0.5960 - 0.6009 in the Asia-Pac session, going into the London open trading around 0.5995. The NZD popped higher as the USD and US Equity futures came under pressure from a combination of increased trade tension between the US and China and the rise in geopolitical risk as Ukraine launches an unprecedented attack deep inside Russia.

• “China on Monday accused the US of violating their recent trade deal by unilaterally introducing new discriminatory restrictions, rebuking Donald Trump’s claim that Beijing breached the consensus reached in Geneva last month. The rhetoric dims the prospect of a call with Chinese President Xi Jinping this week to further bilateral talks" (BBG)
• MNI BRIEF: China May Manufacturing PMI Remains In Contraction: China's Manufacturing Purchasing Managers Index rose by 0.5 points to 49.5 in May, but remained below the breakeven 50 mark for the second month, data from the National Bureau of Statistics showed Saturday. 
• The NZD continues to trade in a 0.5850/0.6050 range, the hawkish slant from the RBNZ last week has only seen a slight paring back of short positions.
• The support back towards 0.5800/50 has held very well, and while this continues to hold expect buyers to be around on dips. A break above 0.6050 is needed to  provide the spark for the next leg higher.
• CFTC Data showed Asset managers maintaining their shorts, while the leveraged community pared back only a small portion of the decent short they had initiated the week before.
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes :  0.6100(NZD375m June 3), 0.5900(NZD401m June 4), 0.5725(NZD600m June 4)

• AUD/NZD range for the session has been 1.0758 - 1.0791, currently trading 1.0765.  A top looks in place now just above 1.0900, the market will have been looking for a more dovish tone from the RBNZ last week and AUD/NZD could now see supply on bounces. The sell zone is back towards 1.0825/50 with the first target being around 1.0650.

  Fig 1: NZD CFTC Data

  

  Source: MNI - Market News/Bloomberg

The AUD/USD has had a range of 0.6433 - 0.6473 in the Asia- Pac session, it is currently trading around 0.6455. The AUD popped higher as the USD and US Equity futures came under pressure from a combination of increased trade tension between the US and China and the rise in geopolitical risk as Ukraine launches an unprecedented attack deep inside Russia.

• AUSTRALIA DATA: "S&P Global Australia May Manufacturing PMI 51 vs 51.7 Prior" - BBG
• "Australia’s inflation gauge fell 0.4% from a month earlier in May bringing annual rate 2.6% y/y from 3.3%, according to the Melbourne Institute Monthly Inflation Gauge and Cost of Living report." - BBG
• “Ukraine attacked Russian airbases with drones destroying 40 bomber planes, according to the BBC. It appears in response to larger Russian attacks on Ukraine recently including Kyiv. Talks are due to start Monday.”(BBG)
• The AUD has struggled to hold onto its early gains and has underperformed in the crosses as US Equity futures stay under pressure.
• Expect buyers to continue to be around on dips while the support in the AUD holds, a close back below 0.6300/50 would start to challenge the newly formed uptrend. A break above 0.6550 and the move higher could begin to accelerate.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6400(AUD586m), 0.6425(AUD454m), 0.6575(AUD445m). Upcoming Close Strikes : 0.6490(AUD 787m June 5)
• CFTC Data shows Asset managers pared back their shorts ever so slightly, the Leveraged community though added to their shorts quite aggressively over the week.

• AUD/JPY - Today's range 92.53 - 92.85, it is trading currently around 92.60. Range looks 92.00 - 94.00 for now, a sustained break sub 91.50/92.00 will bring focus back to towards the lows again.

  Fig 1: AUD CFTC Data

  

  Source: MNI - Market News/Bloomberg

Gold is benefiting from safe haven flows today after a deterioration in the geopolitical picture with US President Trump announcing a doubling of tariffs on steel & aluminium from Wednesday and saying that China had broken the conditions of the trade truce, which China has rebuked. Also increased defence spending was discussed at a security conference in Singapore, while Ukraine attacked Russian airfields. The USD and US yields are little changed.

• Gold prices fell 0.9% to $3289.25/oz on Friday to be flat in May. It hasn’t unwound all of Friday’s loss today though with bullion up 0.7% to $3313.3 and off the intraday high of $3316.77 made early in the session. A bullish theme remains intact but gold is trading between initial resistance at $3365.9, 23 May high, and support at $3213.6, 50-day EMA.
• Ukraine attacked Russian airbases with drones destroying at least 40 bomber planes, according to the BBC. It appears to be in response to larger Russian attacks on Ukraine including Kyiv. Talks are due to take place today.
• The pullback in risk is also reflected in today’s equity sell off with the S&P e-mini down 0.5% and the Hang Seng -2.2%. China is closed for a holiday. Oil prices are higher though with WTI +2.9% to $62.54/bbl. Copper is 3.9% higher but iron ore is lower at around $96/t. Silver is +0.2% to $33.06.
• Later the Fed’s Logan, Goolsbee and Chair Powell appear as well as ECB President Lagarde, BOE’s Mann & Greene. US May manufacturing PMI/ISM and April construction and European May manufacturing PMIs print. The focus this week will be on Friday’s US payrolls.