FOREX: Asia Wrap - USD Bears Back In Charge ?

The NZD/USD had a range of 0.5981 - 0.6015 in the Asia-Pac session, going into the London open trading around 0.5985, -0.40%.  Risk is opening on the backfoot this morning as the world has to again digest Trump's next round of tariffs this time on Europe and Mexico, E-Mini -0.40%, NQ -0.40%. NZD/USD needs to hold this support just below 0.6000 to build for another test higher, the risk is the USD taking a leg higher. A break below this support and the market would look back towards the 0.5850/0.5900 area.

• NZ Data - Services PMI Firmer In June, But Still Comfortably Sub 50.0 : The New Zealand performance of services index rebounded somewhat in June, rising to 47.3 from 44.1 (per BNZ and Business NZ). We are still sub the early 2025 highs for the index, which was just above the 50 expansion/contraction point.
• NZ Data -  Mixed June Card Spending Trends, Down For Q2: June card spending figures were mixed, with total spending down 0.2% m/m, after a 0.3% May gain. Card spending for retail rose 0.5%m/m, after a revised 0.1% fall in May.
• (Bloomberg) -- RBNZ balance sheet has shrunk further in June, according to data posted on the central bank website Monday in Wellington. Total assets declined to NZ$72.4b from NZ$77.3b at May 31, and from NZ$84.4b at June 20, 2024, smallest since November 2020.
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : none.
• CFTC Data shows Asset Managers added slightly to their newly built longs in NZD +9229, the Leveraged community added slightly to their shorts last week -8654.
• AUD/NZD range for the session has been 1.0927 - 1.0972, currently trading 1.0970. TThe cross has broken out of its recent range and is now trying to push through the more pivotal 1.0950 area. Dips back to 1.0850/1.0900 should now be supported as the pair tries to build momentum to move higher. 

Fig 1: NZD CFTC Data

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

Asian stock markets have had a fairly indifferent start to the trading week, albeit with a positive bias for most markets. At this stage, aggregate moves are not much beyond 0.50% for the major regional bourses. US equity futures are down close to 0.40% at this stage. Weekend threats from US President Trump on a 30% tariff for the EU (as well as Mexico) has weighed on sentiment. EU futures are down around 0.60% at this stage. There appears to be room for negotiations but concrete deals might be difficult to achieve ahead of the August 1 deadline. 

• China and Hong Kong markets are marginally higher in the first part of Monday trade. The CSI 300 holding above 4000 at this stage, while the HSI is above 24000. Earlier we have China June trade data, where export and import growth marginally surprised on the upside. These trends don't look spectacular but are holding up well considering tariff levels.
• Japan markets are marginally higher in the first part of Monday trade. We continue to sell upward pressure on longer dated JGB yields. We have upper house elections later this week. Local news wires noted that the ruling bloc may struggle to keep its majority (FNN ANALYSIS via BBG).
• South Korea's Kospi is showing modest outperformance, up +0.40%, near 3190 in index terms. The sell-side consensus remains for higher Kospi levels, with Goldman's upgrading its target, while J.P. Morgan stated the index could get to 5000 within the next few years.
• Taiwan markets are struggling for further upside, with the Taiex down around 0.70% at this stage.
• The ASX 200 is around flat. In SEA, aggregate moves aren't large at this stage. Thailand, Indonesia and Philippines markets are all in the green. 

The Asia-Pac USD/JPY range has been 146.86 - 147.57, Asia is currently trading around 147.30, -0.10%. The pair has traded sideways with little direction, the soft opening for risk saw some reprieve for JPY longs in the crosses. The USD/JPY relentless march higher has been pretty telling, challenging a market positioned the wrong way. Price is now consolidating some of those recent gains, dips back towards 145.00 should now find support first up. CFTC Data shows leveraged funds have pared back their JPY longs almost back to flat, Asset managers have pared back some of their position but still continue to run a decent sized long JPY position.

• (Bloomberg) -  " The Bank of Japan finished selling millions of dollars of stocks it bought from besieged banks, ending a nearly two decade process. The BOJ's holdings of the shares purchased from banks hit zero as of July 10, falling from 2.5 billion 10 days ago, according to its balance sheet report."
• JAPAN DATA -  Core Machine Orders Y/Y Slows, But Still Pointing To Resilient Capex.
• "JAPAN RULING BLOC MAY LOSE MAJORITY IN ELECTION: JNN ANALYSIS” - BBG
• (Bloomberg) - Options traders appear to be positioning for the yen to weaken further in the near-term due to looming US inflation data and Japan’s upper house elections.
• USD/JPY has lost all downside momentum for now and is back in its wider 142.00 - 148.00 range. The Market is long JPY and should the USD manage to continue to correct higher the risk is a move back to the top end of the range to further challenge the conviction of the shorts.
• Options : Close significant option expiries for NY cut, based on DTCC data: 146.10($514m).Upcoming Close Strikes : 146.50($1.25b July 16).
• CFTC data shows Asset managers reduced their JPY longs slightly +89331, while leveraged funds have almost squared their newly built JPY longs +5224.

Fig 1 : JPY CFTC Data

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