FOREX: AUDUSD Approaching Key 0.6595 Resistance
Jul-23 09:24
- AUD and NZD remain the clear outperformers on Wednesday, benefitting from the buoyant price action for major equity benchmarks on the back of a US/Japan trade deal being reached overnight. Renewed bearish dollar sentiment this week is underpinning the move higher for antipodean FX, with the latest comments from Tsy Sec Bessent aiming at extending a tariff truce and widening the discussions with China also providing a tailwind.
- Furthermore, recent dovish data surprises in both Australia (weak June employment report) and New Zealand (softer Q2 CPI) may have skewed short-term positioning, potentially bolstering the chances for a more protracted squeeze as we approach some interesting chart points.
- Specifically for AUDUSD, spot is approaching a cluster of daily highs, just below the 0.66 handle. The renewed strength has been bolstered by the pair failing to close below its 50-day EMA, keeping the bullish trend setup intact. The July 07 cycle high is located at 0.6595, and clearance of this hurdle would resume the uptrend.
- Above here, resistance is scant until 0.6688, the Nov 07 high, printed shortly after the US election last year. Additionally, 0.6700 represents the 76.4% retracement of the Sep 30 ‘24 - Apr 9 bear leg.
- AUDJPY also stands out on the chart, having broadly respected the prior breakout level of 95.75 on Tuesday and bouncing firmly today. An initial target was reached last week at 97.33 and this remains the primary resistance. A break above here would target a move back to the 2025 highs at 99.17.
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SWAPS: Little Movement In EUR Spreads Early This Week, German Fiscal News Eyed
Jun-23 09:24
German ASWs and EUR swap spreads are little changed to start the week, with the geopolitical developments and impending EU supply having little net impact on the space.
- Last week saw Societe Generale note that the ECB outlook and prevailing downside global risks, coupled with expectations surrounding Dutch pension fund flow, “creates curve asymmetry and favours 5-30y EUR steepening in a moderate rates rally”.
- They went on to highlight that “EUR 6m5y implied vol screens cheap versus 6m30y, with the spread widening notably after Germany’s fiscal pivot in March 2025. Regression residuals are now near sample lows, highlighting stretched relative pricing and an attractive entry point”.
- Tomorrow’s German fiscal announcements are eyed. We will release our detailed thoughts on this matter in due course.
FOREX: USDJPY Extends Relief Rally, Reversal Trigger on Horizon
Jun-23 09:17
- With oil prices fully reversing their initial surge to start the week, and equity benchmarks remaining resilient to geopolitical developments, Japanese Yen weakness is continuing to standout Monday. The break of a confluence of technical parameters has been assisting the move higher, namely the breach of the downtrend (drawn from the January highs) and the clean break of the May 29 high, cancelling the recent bearish theme.
- Positioning dynamics are also likely bolstering the relief rally, as price action continues to point to a market that is positioned long JPY. Indeed, in the latest CFTC report, data shows asset managers maintained their already extensive JPY longs, while leveraged funds have pared back their own longs that had just begun to be rebuild.
- Today’s advance in USDJPY (+1.16%) strengthens a bullish theme, increasing the focus on a key resistance at 148.65, the May 12 high and a reversal trigger. Clearance of this level would confirm a resumption of the bull cycle that started Apr 22. Above here, 149.28 and 150.49 represent the next targets for the move, the April 3/2 highs respectively.
- Significant events on the calendar this week include US GDP (3rd read) and May PCE, June Tokyo CPI and Fed Speak which includes Chair Powell delivering congressional testimonies.
Source: Bloomberg Finance L.P. / MNI
PIPELINE: Denmark 2-year USD Benchmark: Mandate
Jun-23 09:03
"The Kingdom of Denmark (DENK), rated Aaa/AAA/AAA (all stable), has mandated Danske Bank, HSBC, J.P. Morgan and Morgan Stanley as Joint Lead Managers for a new 2-year USD 144A/REGS benchmark senior unsecured transaction. The issue is expected to be launched in the near future subject to market conditions".
From market source.
