FOREX: AUD Slips as Markets Bring Forward RBA Rate Cut View
- The RBA rate decision worked against the AUD, as the bank are reportedly "gaining some confidence" over the trajectory of inflation. As a result, markets (and sell-side) have bought forward their view for the next likely rate cut in Australia. As a result, AUD/USD faded to 0.6380 intraday, keeping support under pressure at the December pullback low of 0.6373.
- EUR/GBP has broken to new YTD lows, with spot dropping to new pullback lows, and the lowest levels in over two-and-a-half years as markets re-enter a previously-tested area of demand. We had noted across the past few weeks a clear area of demand in the cross layered between 0.8260-87 that coincides with the longer-term range-defining support. Note that this equates to 1.21 in GBP/EUR - a psychological resistance level that often draws attention, and has not been meaningfully broken since 2016 and the year of the Brexit referendum.
- EUR/USD spot has been led lower by the uptick in US yields, putting spot through yesterday's lows and within range of 1.0517, the 38.2% retracement for the upleg off the cycle low from mid-November, and next major support. Overnight EUR vols have crested just above 14 points - below the prevailing levels seen pre-NFP last week. With tomorrow's print the last of the year and likely directly influencing next week's rate decision, an outside-of-consensus print will test the sustainability of the USD Index's stabilisation above December lows.
- Tuesday data and speaker schedule is light, with no notable US releases outside of nonfarm productivity stats and unit labour costs. The Fed remain inside their pre-rate decision media blackout period - keeping the calendar clear.
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JGB TECHS: (Z4) Bounce Reverses
- RES 3: 149.55 - High Mar 22 (cont)
- RES 2: 147.74 - High Jan 15 and bull trigger (cont)
- RES 1: 146.53 - High Aug 6
- PRICE: 143.70 @ 16:14 GMT Nov 08
- SUP 1: 143.39 - Low Nov 07
- SUP 2: 142.23 - Low Jul 02
- SUP 3: 140.21 - 1.236 proj of Mar 22 - Nov 1 ‘23 - Jan 15 price swing
Prices fell further Thursday, extending the recent pullback. The return lower at the start of this week has culminated in a break of 143.57, marking both the Jul 17 high on the continuation contract as well as the Oct 22 low. For now, the 50-dma tops out at 144.32, and marks first resistance. A continuation higher would open 146.53, the Aug 6 high (cont) and a bull trigger.
US TSY FUTURES: BLOCK: Late 2Y/10Y Ultra-Bond Flattener
- Flattener crossed late Friday at 1645:30ET, DV01 $322,000
- -8,900 TUZ4 102-23.88, sell through 102-24.38 post time bid vs.
- +3,700 UXYZ4 113-16, post time offer
USDCAD TECHS: Trend Needle Points North
- RES 4: 1.4179 2.0% 10-dma envelope
- RES 3: 1.4000 Round number resistance
- RES 2: 1.3977 High Oct 13 and a key M/T resistance
- RES 1: 1.3959 High Nov 1 / 6
- PRICE: 1.3910 @ 16:29 GMT Nov 8
- SUP 1: 1.3836/22 20-day EMA and a key S/T support / Low Nov 6
- SUP 2: 1.3744 50-day EMA
- SUP 3: 1.3611 Low Oct 8
- SUP 4: 1.3567 Low Oct 7
USDCAD reversed course Wednesday and recovered from Tuesday's low. The trend outlook is unchanged, it remains bullish. Attention is the key resistance at 1.3946, the Aug 5 high. This hurdle has been pierced, a clear break would strengthen the uptrend and open 1.3977, the Oct 13 high and a key medium-term resistance point. Initial firm support to watch lies at 1.3836, the 20-day EMA.
