FOREX: AUD Crosses-AUD Outperformance Building Momentum, GBP/AUD Topping Out ?
US Equities made new all-time highs again, ignoring any concerns for growth as inflation came in as expected. This morning US futures have opened slightly lower, E-minis -0.05%, NQU5 -0.05%. The AUD outperformance in the crosses continues to build momentum and are testing some key levels. AUD/USD is also trying to break higher through the top of its recent range as price action is starting to turn positive across the board for the AUD.
- EUR/AUD - Overnight range 1.7610 - 1.7714, Asia is currently trading around 1.7595. The pair has broken through its first support around the 1.7800 area, price has moved quickly to the next support around 1.7600. Momentum higher seems to have now stalled and a break back below 1.7600 potentially signal a deeper correction back to the support between 1.7300/1.7400.
- GBP/AUD - Overnight range 2.0371 - 2.0485, Asia is trading around 2.0355. The pair is trying to break below the lower band of the range towards 2.0400 which has held since March. The price action of the pair is looking potentially exhaustive and sustained break sub 2.03/2.04 would open up a deeper pullback towards 1.9800/2.0000. I expect rallies to now be met with supply.
- AUD/JPY - Overnight range 97.47 - 98.11, Asia is trading around 98.15. The pair extended higher overnight, turning the focus back towards the 99.00/100.00 area. Dips back towards 96.50/97.00 should be expected to be supported now first up.
- AUD/NZD - Overnight range 1.1132 - 1.1156, the cross is dealing in Asia around 1.1155. The Cross is consolidating above 1.1100, dips back towards 1.1000/1.1050 should be supported now. A break above the multiple highs towards the 1.1200 area is needed to regain the momentum higher.
Fig 1: GBP/AUD spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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US STOCKS: S&P Explodes To Make New All-Time Highs
The ESU5 overnight range was 6391.25 - 6474.75, Asia is currently trading around 6466. The ESU5 contract stormed to new all-time highs in the N/Y session as the market gears up for a potential series of rate cuts. This morning US futures have opened pretty muted though still at their highs, ESU5 -0.02%, NQU5 +0.03%. Only a break below 6200 would potentially signal a deeper correction but for now the price action in stocks continues to be bullish ignoring all headwinds as the Trump Administration runs the economy on hot.
- Ben Hunt on X: “If we’re gonna cut in Sept (90% mkt odds as I write this) with core at 3.1% and rising, wages at 3.9% and rising, stocks and home prices at all-time highs … Can we at least stop talking about the Fed’s 2% inflation ‘target’? It’s just insulting to continue this charade.”
- Charlie Bilello on X: “1. Stocks: all-time high 2. Home Prices: all-time high 3. Bitcoin: all-time high 4. Gold: all-time high 5. Money Supply: all-time high 6. National Debt: all-time high 7. CPI Inflation: 4% per year since Jan 2020, 2x the Fed's "target" 8. Fed: cutting interest rates next month.”
- Daily Chartbook on X: "Over July 22nd - August 5th, Hedge Fund short sold $4.3bn - the largest 2 week amount for at least the past 10 years. The resultant level of outstanding shorts in notional terms also marked a new high. -GS Quinn.”
Fig 1: SPX Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
JAPAN DATA: Import Prices Up For First Month Since Jan, Y/Y Still Negative
For July, export and import prices both rose in m/m terms. Export prices were up 1.6%, while import prices were up 2.4%m/m. For import prices this was the first m/m rise since January of this year. In y/y terms, both export and import prices were still in negative territory, but up from the June levels. Export prices were -5.4%y/y, while imports were -10.4%.
- The chart below plots y/y changes in USD/JPY versus import prices y/y. To end July USD/JPY was up a touch in y/y terms. If current spot levels prevail, (currently around 147.80), USD/JPY will remain positive in y/y terms to end September (note USD/JPY was 152.03 end Oct last year).
- This implies some upside to import price y/y momentum in the near term, albeit fairly modestly. If USD/JPY holds around current level to end September, we would be up +2.9% in y/y terms.
Fig 1: Japan Import Prices & USD/JPY, Y/Y
Source: Bloomberg Finance L.P./MNI
AUSSIE BONDS: Dec-35 Supply Faces Lower Yield But Same Curve
The Australian Office of Financial Management (AOFM) will today sell A$1200mn of the 4.25% 21 December 2035 bond. The line was last sold on 9 July 2025 for A$1200mn. Bidding is likely to be shaped by several key factors:
- The current outright yield is 5-10bps lower than the previous auction and approximately 50bps lower than the peak in late 2024.
- The 3/10 yield curve is around the same level as the previous auction but sits around 20bps below its recent high.
- On the negative side, the auction comes amid weaker sentiment toward longer-dated global bonds.
- However, the line is included in the XM basket.
- While some factors may limit the overall strength of bidding, there is an expectation of continued firm pricing at today's auction.
- Results are due at 0200 BST / 1100 AEST.
