FOREX: AUD Crosses - Tread Water As The USD Comes Under Pressure

In holiday-affected trading, European natural gas prices were flat on Monday at around EUR 33.08, close to the intraday high. They had traded in a narrow range through the session. Softer demand continues to weigh on prices with them down 21.7% in April but the fall has attracted Asian buyers. Soft manufacturing PMIs point to industrial usage remaining lacklustre or even deteriorating as US trade policy worries producers.

• Lower prices and a change in the weather as well as increased renewables-generated power have allowed the EU to begin refilling storage ahead of next winter and are now at over 40% although still below the 50% 5-year average.
• Bloomberg reported that the EU is about to present a plan to finish Russian gas imports by end-2027, but with increased supply expected by then the shift may have a limited impact on gas prices.
• US gas fell 1.7% to $3.57 after rising to $3.75 yesterday. In the near-term, the weather is expected to be mild but then warm up around mid-May, according to NatGasWeather, with the possibility of some cooling demand then.
• Yesterday lower-48 US production rose 4.6% y/y, while demand fell 4.1% y/y. The previous week EIA-reported US inventories returned to the 5-year average, according to Bloomberg.
• Flows at the US’ Freeport LNG facility have picked up again after power issues but one train remains offline at Cameron due to planned maintenance.

After initially trying higher on a better than expected ISM services print risk could not hold onto these gains and closed poorly. (Bloomberg) -- Macquarie Group Ltd. Chief Executive Officer Shemara Wikramanayake said Australia’s economy is looking resilient and is set up well to withstand the shocks emanating from US trade policy. “The economy is coming into this really quite resilient,” she said at the Macquarie Australia Conference in Sydney on Tuesday. “Capital is coming into this market.” “Australia is once again going to prove one of the more resilient economies in the world,” Wikramanayake said. 

• EUR/AUD - Overnight range 1.7464 - 1.7531. Asia is trading around 1.7505. The first support around 1.7600 was broken on Friday as the AUD outperforms. Sellers should remerge now back towards 1.77/78, with upward momentum broken this pair looks a little directionless.
• GBP/AUD - Overnight range 2.0482 - 2.0563. Asia is trading around 2.0570. A good break lower on Friday, a reduction in some longs potentially targets the 2.02/03 area. A bounce back towards 2.0800 should now see sellers first up.
• AUD/JPY - Overnight range 92.94 - 93.47, Asia is trading around 92.85. AUD/JPY has had a powerful extension as shorts are pared back. Price is now moving towards testing the Weekly resistance seen between 94.00/96.00 sellers should remerge here.
• AUD/NZD -  Overnight range 1.0819 - 1.0854, the cross is dealing in Asia around 1.0840. Sellers could be expected again around these levels, a move back above 1.0900 would negate the bearish trend.

Fig 1: AUD/JPY spot Daily Chart

Source: MNI - Market News/Bloomberg

TYM5 is trading 111-02, unchanged from its close. 

• The US 10-year yield closed in the US around 4.3433%, it's a holiday in Japan today.
• Bloomberg- “Global real money is buying Treasuries following the recent cheapening. While there is more supply to come, taking yields higher in the interim, by the end of the week real money buys should be rewarded.”
• “After $58 billion in 3-year Treasuries stopped through, logic says that sets up for a similar result on the $42 billion reopening sale Tuesday as well as the $25 billion 30-year reopened bond on Thursday. And with ~$14 billion in IG bonds pricing with ease, corporate treasurers are likely to issue even more Tuesday. Rate locks and position adjusting linked to the supply will likely take yields higher in the days ahead.”
• The 10-year Yield range seems to be 4.10% - 4.45%, price has moved above the 4.30% pivot and with more supply to come this week a push back to 4.45% is possible before the buyers come in.
• Data: US Trade Balance