AUD: Asia Wrap - Quiet Session, Trades Steady
The AUD/USD has had a tight range of 0.6427 - 0.6447 in the Asia- Pac session, it is currently trading around 0.6445. US stocks stabilised in the Asian session and the AUD has traded sideways in a pretty quiet session.
- MNI Data - The preliminary May S&P Global composite PMI showed a moderation in growth with the index easing to 50.6 from 51, the lowest since February. The quarterly averages are showing that after a slight pickup in private sector growth in Q1 it likely slowed a bit in Q2. The manufacturing PMI was stable at 51.7, while services eased to 0.5 points to 50.5, lowest since November.
- “Nomura has added another RBA rate cut to its outlook and now forecasts a 25bp reduction in November in addition to August, which would take the cash rate to 3.35%.”(BBG)
- The AUD/USD is looking comfortable in a 0.6350 - 0.6550 range. The AUD continues to hold up pretty well against the USD so If you want to express a short it looks best to do that in the crosses for now.
- Expect buyers 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.
- Options : Closest significant option expiries for NY cut, based on DTCC data: none, Upcoming Strikes : 0.6375(AUD683m May 23), 0.6550(AUD529m May 23), 0.6510(AUD1.4b May 27)
AUD/JPY - Today's range 92.14 - 92.84, it is trading currently around 92.25. Decent demand again seen towards the 92.00 area as it holds overnight. A sustained close back below 91.50/92.00 is needed to turn the focus back towards the lows again. With stocks looking like they have more to go in this retracement it could provide further headwinds for this pair.
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg
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FOREX: Antipodean Wrap - AUD & NZD Making New Highs
With hopes of any early trade deal fading, the market very quickly returned to what is now becoming a consensus trade, sell the USD. USD/CNH is stable but look at EUR/CNH and CNH/JPY to see how the Yuan is being managed lower. “ (Bloomberg) -- New Zealand exporters had a bumper start to the year, buoyed by a lower currency and higher global prices for key commodities such as milk powder and meat. Exports surged to a record NZ$20.6 billion ($12 billion) in the three months through March, Statistics New Zealand said Tuesday in Wellington. That’s a seasonally adjusted 11% jump from the fourth quarter and 19% more than the year-earlier period.”
- AUD/USD - Asian range 0.6402 - 0.6436, AUD has traded better bid for most of the Asian session. After showing some signs of exhaustion at the end of last week the AUD has broken and held above the pivotal 0.6400 area. Dips back to the 0.6300 area should continue to find demand while the market obsesses about a lower USD.
- AUD/JPY - Asian range 90.12 - 90.57. Price goes into the London open towards the lows trading around 90.20, still firmly within last week’s range of 89.50-91.50. Support towards 90.00 continues to hold for now, a break through here and the downward trend could be reinstated.
- NZDUSD - Asian range 0.5981 - 0.6021, NZ exports hit a record on low currency and high commodities. The market is going into London pressing new highs. Thoughts of a reversion were fleeting as upward momentum is reignited. Expect buyers to return first around 0.5920/50, then around 0.5850/80.
- AUD/NZD - Asian range 1.0682 - 1.0706, the cross has drifted sideways in the Asian session.
Fig 1 : AUD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg
GOLD: Close To $3500, Moving In Line With USD Weakness
Gold is fast approaching the $3500 level. Session highs rest at $3494.8, while we were last near $3486/87, still up 1.8% for the session so far. Monday's gain for bullion was 2.92%.
- Gold is moving in lockstep with USD weakness, the chart below shows bullion plotted against the BBDXY index, which is inverted on the chart.
- The inability of the USD to sustain the earlier modest rebound has likely only added to gold's current bullish momentum. The USD remains firmly under pressure, with continued unwinding of US exceptionalism in focus.
- As we noted earlier, the RSI (14) on gold is comfortably into overbought territory, not at 79.6, but we are still under 2024 extremes for this metric.
Fig 1: Gold Spot Price & USD BBDXY Index (Inverse)
Source: MNI - Market News/Bloomberg
JGBS: Weaker & At Session Lows At Lunch
At the Tokyo lunch break, JGB futures are sharply weaker and at session lows, -41 compared to the settlement levels.
- "Bank of Japan officials see no need to change their stance on gradually raising interest rates despite US tariffs, as they wait for more data to analyse the impact. The BOJ is likely to hold its policy settings steady at its May 1 meeting and may cut its price forecast due to a stronger yen, cheaper oil, and economic weakness." (per BBG)
- “The impact of Donald Trump’s tariff campaign has already filtered through to Japanese companies, with about 10% saying the measures have affected their businesses and more voicing concern on the future jolt, according to a MoF survey.” (per BBG)
- Cash US tsys are slightly cheaper, with a flattening bias, in today's Asia-Pac session after yesterday's long-end sell-off.
- Cash JGBs are 1- 5 bps cheaper across benchmarks, with the belly leading. The benchmark 10-year yield is 4.5bps higher at 1.330% versus the cycle high of 1.596%.
- Swap rates are 2-6 bps higher. Swap spreads are mixed.
- Today, the local calendar will be empty apart from an Enhanced Liquidity Auction for 15.5-39-year JGBs.
