FOREX: AUD Crosses - Consolidate Recent Gains

The ESU5 Friday night range was 6183.25 - 6239.00, Asia is currently trading around 6240. After pushing up to new all-time highs on Friday night, stocks had a quick reversal on the news Trump was ending trade talks with Canada, after dropping close to 1% from their highs US stocks bounced back into their close. This morning has seen this bounce resume as US futures open our session strongly ESU5 +0.25%, NQU5 +0.35%. There has been plenty written about why US stocks should struggle but in the end a poorly positioned market has been forced to cut their underweights and with indices making new all-time highs the momentum type funds will again be adding to their positions. Month-end, Quarter-end tonight might see some selling in a market that looks a little overdone but direction seems clear in the short-term.

• Julien Brigden on X: "We are bombarded by "S&P at new highs". But it's MONEY ILLUSION. By staying in US stocks, you are getting relatively poorer. Yes, in $ terms, the S&P is up 5% YTD, but flat in foreign currencies. As a US investor, you'd be up  20% in European stocks. This is why FX is key!” 
• Lance Roberts on X: ”For 10 straight years, the S&P 500 has gained in July—an impressive record. Historically, July is the best month for stocks in post-election years. Another gain this July would tie the longest winning streak for the month in history.” See Graph below.
• The Big Beautiful Bill will add roughly $3.3 Trillion to the U.S. Deficit warns the Congressional Budget Office.(BBG)
• Both S&P and the NASDAQ are now making new all-time highs as Tech continues to lead the indices higher. Interesting that the Russell and the Dow Transports are still lagging by quite a bit.
• This in the face of some well documented headwinds that have been building. These include: Share buybacks that are now in their blackout period, the absence of this large underlying bid reportedly around $40 billion a week, has barely registered for now. 
• This together with what looks to be some large month-end rebalancing was to provide some decent headwinds for US Equities in the short-term. 
• Zerohedge on X: ”Pension funds are estimated to sell $56BN in global equities at month-end: UBS”

Fig 1: SPX Win Streak For The Month Of July

Source: MNI/@LanceRoberts/Carson Group

In Tokyo morning trade, JGB futures are weaker, -18 compared to settlement levels.

• (Bloomberg) -- Inflation adjusted Japan existing home sales average price NSA rose 5.5% in March from the same period last year, according to Bloomberg calculations using official data.
• (Bloomberg) -- Japan’s industrial production rose less than expected in May, missing analysts’ estimates as the US tariffs hit the nation’s exports. Factory output increased 0.5% from the previous month, the Industry Ministry reported Monday. Economists had expected a 3.5% gain. Output fell 1.8% from a year earlier, missing expectations of a 1.6% rise.
• Cash US tsys are slightly mixed, with a steepening, in today’s Asia-Pac session after Friday’s modest losses.
• Cash JGBs are ~1bp cheaper across benchmarks. The benchmark 10-year yield is 0.9bp higher at 1.447% versus the cycle high of 1.596%.
• Swap rates are ~1bp higher. 

The CFTC positioning update for the week ending June 24th showed a shift against the USD, particularly in terms of leveraged investors (albeit for the A$). Asset managers were more mixed in terms of the weekly shift.  

• Net selling of the A$, by both leveraged players and asset managers was a standout last week. Both investor bases remain net short the A$. Given generally positive AUD/USD momentum, such flows may be to play for AUD underperformance on key crosses rather than against the USD.
• Leveraged investors added notably to net longs for JPY, EUR and GBP. CAD shorts were also reduced.
• In the asset manager space, aggregate shifts for JPY and EUR weren't large, but net shorts for GBP were added too.
• For NZD, we saw asset managers add longs. At +12k, net longs for this segment is a clear contrast to the still meaningful short asset managers are running with for the AUD. 

Table 1: CFTC FX Positioning By Currency & Investor Type 

Source: Bloomberg Finance L.P./CFTC/MNI