FOREX: Asia Wrap - USD Stabilised After Overnight Fall
The BBDXY has had a range of 1204.59 - 1206.37 in the Asia-Pac session, it is currently trading around 1206, +0.07%. The USD topped out above 1210 and reversed lower with US yields in response to a softer JOLTS report. A sustained break below 1197/1195 is needed to regain the momentum lower and retest the year's lows. The USD is looking comfortable for the moment above this support, not sure we get any clear direction though until the market sees what the NFP print is.
- EUR/USD - Asian range 1.1651 - 1.1669, Asia is currently trading 1.1655. The pair is drifting back towards its first support around 1.1550, firmly within its wider 1.1350-1.1850 range.
- GBP/USD - Asian range 1.3426 - 1.3450, Asia is currently dealing around 1.3430. The pair collapsed in response to moves in UK bonds. Price bounced off its support around 1.3350, though I suspect offers should now find supply on rallies back towards 1.3500. A sustained break below 1.3350 would open up a move back to 1.3100.
- USD/CNH - Asian range 7.1362 - 7.1450, the USD/CNY fix printed 7.1052, Asia is currently dealing around 7.1420. Sellers should be around on bounces while price holds below the 7.2200/2500 area and the PBOC manages the fix lower. Above 7.2500 and we could see a test of the USD Shorts.
- Cross asset : SPX +0.15%, Gold $3530, US 10-Year 4.217%, BBDXY 1206, Crude Oil $63.52
- Data/Events : EZ Retails Sales, Germany HCOB Construction PMI
Fig 1: BBDXY Spot 2H Chart
Source: MNI - Market News/Bloomberg Finance L.P
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GOLD: Bullion Off Today’s High But Holding Onto Post-Payroll Gains
Gold prices are slightly lower in today’s APAC session after rising sharply following the disappointing US July payrolls data and increased pricing of Fed rate cuts. They peaked at $3382.40/oz before trending lower to $3371.33 and are around $3372.0. The higher US dollar and yields put downward pressure on non-interest bearing bullion.
- Silver is down 0.1% to $37.384 after a high of $37.494. It reached a low of $37.371 earlier.
- Equities have followed the US higher with the Nikkei up 0.6%, Hang Seng +0.3%, KOSPI +1.4% and S&P e-mini +0.1%. Oil prices are lower with WTI -0.2% to $66.16/bbl. Copper is up 0.3%.
- Later June US trade, final July S&P Global services/composite PMIs and services ISM print. In Europe, there are July services/composite PMIs and June euro area PPI.
NZD: NZD/USD - Trades Heavy Even With Risk Extending Higher
The NZD/USD had a range of 0.5891 - 0.5923 in the Asia-Pac session, going into the London open trading around 0.5895, -0.25%. US Yields slipped lower again overnight, but stocks came roaring back and the USD went nowhere. NZD/USD bounced nicely off its 0.5850 support but would suspect sellers would return on any bounce back toward 0.6000, it looks like we might consolidate within the 0.5850-0.6100 range while we wait for clearer direction. It has traded heavy in our session after initially trying higher, ignoring the move higher in risk.
- (Bloomberg) -- New Zealand's commodity export prices fell 1.8% m/m in July versus revised -2.4% in June, according to ANZ Bank.
- CHINA PMI Services Records Large Gains: China's S&P Global China PMI (formerly CAIXIN) came in ahead of expectations in July. Up at 52.6, it was a material increase from June's result of +50.6 and estimates of +50.4. The result was the best since May 2024 with the employment index up to +50.9, from June's contraction.
- “The US is exploring ways to equip AI chips with location tracking to curtail exports to China and other restricted countries.” - BBG
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5970(NZD3496m Aug 7). - BBG
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6000(NZD315m). Upcoming Close Strikes : 0.5970(NZD496m Aug 7), 0.6140(NZD364m Aug 7). - BBG
- AUD/NZD range for the session has been 1.0938 - 1.0960, currently trading 1.0955. The Cross continues to consolidate on a 1.09 handle as the pair tries to build some momentum to move higher.
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
BONDS: NZGBS: Richer & At Session Bests, Q2 Employment Data Tomorrow
NZGBs closed at session bests, 4-5bps richer.
- Cash US tsys are flat to 2bps cheaper, with a flattening bias, in today's Asia-Pac session after yesterday's modest extension of Friday's rally. The highlight of today’s US calendar will be the US ISM services index for July.
- ANZ commodity export prices fell 1.8% m/m in July versus a revised -2.4% in June.
- Tomorrow, the local calendar will see Q2 labour market data. It is expected to show that it weakened in the quarter after some signs of stabilisation in Q1. The unemployment rate is forecast to rise 0.2pp to 5.3% more than the RBNZ's 5.2% May projection. If the data print is as weak as or weaker than the Bloomberg consensus, then a rate cut on August 20 is likely.
- RBNZ dated OIS pricing closed showing 23bps of easing is priced for August, with a cumulative 42bps by November 2025.
- On Thursday, the NZ Treasury plans to sell NZ$225mn of the 4.50% May-30 bond, NZ$175mn of the 4.50% May-35 bond and NZ$50mn of the 1.75% May-41 bond.
