AUD: Asia Wrap - The NZD And Risk Drag AUD/USD Lower
The AUD/USD has had a range of 0.6429 - 0.6462 in the Asia- Pac session, it is currently trading around 0.6440, -0.25%. The AUD has been dragged lower by the move in the NZD and risk extending its correction lower in Asia. The AUD broke below its support just below 0.6500 overnight and looks likely to continue to trade heavy into the Jackson Hole meeting. Pivotal support is back towards 0.6300/50 which has been the bottom in its recent multi-month range of 0.6350-0.6650.
- Bloomberg - “Asian stocks fell after a selloff in big tech dragged Wall Street lower. US futures slid. Citadel Securities’ Scott Rubner said retail investors may slow their stock buying in September before resuming later this year.”
- "China Plans Broader Measures to Boost Housing Market: Paper. China is expected to roll out a fresh batch of measures to stabilize the housing market, Securities Daily reports, citing industry analysts it interviewed." - BBG
- Bloomberg - “China’s commercial banks kept loan prime rates steady for a third month, as expected.”
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6600(AUD410m). Upcoming Close Strikes : 0.6510(AUD520m Aug 25), 0.6600(AUD1.34b Aug 21) - BBG
- CFTC Data shows Asset managers added to their shorts -67449(Last -60729), the Leveraged community though reduced their own shorts -10121(Last -13997).
- AUD/JPY - Asia-Pac range 94.87 - 95.37, Asia is trading around 94.95. The pair broke through 95.50 overnight and has put in another lower high. Although the price is still in the 94.00-97.50 range the multiple failures towards 97.00 looks like a rounded top and with risk looking vulnerable a test of the lower end of the range looks possible. A sustained break below the 94.00/94.50 area could potentially see momentum lower pick up. Not sure we see this until Jackson Hole event risk is out the way.
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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AUD: AUD/USD - Consolidating Above 0.6500
The AUD/USD has had a range of 0.6498 - 0.6520 in the Asia- Pac session, it is currently trading around 0.6510, +0.02%. The pair found decent supply back towards 0.6550 again on Friday. The follow through below 0.6500 is 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.
- The focus this week is likely to be on the RBA with the July meeting minutes published on Tuesday and Governor Bullock speaking at the Anika Foundation lunch on Thursday. Both will be monitored for further information on what lay behind the unexpected decision to hold and central bank thinking following the disappointing June jobs data.
- China Daily - “reports that it is a 'strategic necessity' for the scaling back of holdings in US Treasuries, given the declining confidence in the dollar as the reserve global currency.”
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6600(AUD729m), 0.6500(AUD821m) . Upcoming Close Strikes : 0.6650(AUD495m July 24) - 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 96.32 - 96.75, it is trading currently around 96.65, -0.20%. The pair strangely gapped lower on the open in reaction to the Japanese election result, it found good demand back towards the breakout area around 96.00, and this will need to hold to build a platform from which to probe higher again. The positive risk backdrop should provide tailwinds. CFTC Data shows a clear turning now as Asset managers reduced their shorts and Leveraged accounts actually began to build JPY shorts.
Fig 1: AUD CFTC Data
Source: MNI - Market News/Bloomberg Finance L.P
CHINA: Bond Futures Follow on from Friday's Selloff
- Bond futures are down in the morning session, following on from Friday's falls.
- The 10yr is lower by -0.10 at 108.71 and sits just above the 200-day EMA of 108.70. It has not traded below the 200-day EMA since last May.
- China's 2yr bond future is lower by -0.02 at 102.40 to remain below all major moving averages. The nearest (above) being the 20-day EMA of 102.44.
- The 10YR CGB has drifted higher in yield by +1bp in this morning's trade to reach 1.67%
US TSYS: TYU5 Up Slightly On The Day
The TYU5 range has been 110-24 to 110-28 during the Asia-Pacific session. It last changed hands at 110-26, up 0-01 from the previous close.
- No Cash market today
- The 10-year yield broke above 4.45% in response to the CPI Data, this implies price is likely to turn its focus back to 4.65% and could see further paring back of longs. Support is now back towards the 4.35/40% area which has been the pivot in the larger 4.10% - 4.65% range.
- Daily Chartbook on X: “On Wednesday, "the US Treasury reported the largest inflow of foreign capital to that market (net purchases) since 2022, obliterating the narrative that foreign investors are fleeing Treasuries (or US equities) due to political risks.”@bespokeinvest
- “China Daily reports that it is a 'strategic necessity' for the scaling back of holdings in US Treasuries, given the declining confidence in the dollar as the reserve global currency.” - BBG
- (Bloomberg) -- “EU envoys will meet as early as this week to draft a retaliatory plan in response to a possible no-deal scenario with Donald Trump. The move follows a hardened stance from the US trade team ahead of the Aug. 1 deadline.”
Data/Events: Leading Index
Fig 1: 10-Year US Yield Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
