AUD: AUD/USD - Consolidates Above 0.6400
The AUD/USD had a range overnight of 0.6415-0.6432, Asia is trading around 0.6420. US equities continue to trade heavy, particularly big Tech as the market awaits direction from Powell's speech. The AUD is consolidating just above 0.6400 heading into it. Pivotal support is back towards 0.6300/50 which has been the bottom in its recent multi-month range of 0.6350-0.6650.
- (Bloomberg) - “Australia aims to scrap more “nuisance tariffs” and clear a huge backlog of environmental approvals for new homes as part of its initial response to an economic summit, though participants were opposed to another wide-ranging tax review.”
- “The People’s Bank of China’s latest monetary policy report confirms its stance — steady but restrained easing, with a heavier reliance on targeted tools to reorient the economy toward new growth drivers. That reflects pragmatism in the face of trade tensions and structural weaknesses in confidence and consumption.” - BBG
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6525(AUD350m). Upcoming Close Strikes : 0.6525(AUD570m Aug 27) - BBG
- CFTC Data shows Asset managers added to their shorts last week -67449(Last -60729), the Leveraged community though reduced their own shorts -10121(Last -13997).
Fig 1: AUD/USD spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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CNH: USD/CNH Range Bound Despite Fresh USD Weakness, CNY Basket Lower
USD/CNH was little changed in Tuesday trade, with the pair tracking near 7.1700 in early Wednesday dealings. Tuesday's range was close to 7.1800 on the topside, while a late dip under 7.1700 drew some support. Broader USD sentiment was softer, with the BBDXY losing a further 0.40%, while the DXY fell by close to 0.50%. Spot USD/CNY finished up at 7.1690, while the CNY CFETS basket tracker fell by 0.24% to 95.87, as the yuan underperformed renewed USD weakness.
- For spot USD/CNH recent ranges continue to prevail amid a very low backdrop. The 50-day EMA resistance point remains intact on the topside, last around 7.1900. Earlier July lows near 7.1500 will be a focus point on the downside.
- An extension lower for US yields appears to have assisted the USD move on Tuesday, helped by Treasury Secretary Bessent providing a more optimistic tone regarding Powell’s short-term future as the Fed Chair.
- US-CH yield differentials continue to track lower, but for the 2yr and 10yr tenors we are above late June lows. The 10yr spread is around +265bps.
- Equity sentiment remains positive for China, with the CSI 300 closing near 4119, fresh highs back to Nov last year. In US trade, the Golden Dragon index gained +1.7%. We continue to see the China to global equity ratio firm, but this isn't providing much positive impetus to CNH.
- "US Treasury Secretary Scott Bessent said he will meet his Chinese counterparts in Stockholm next week for their third round of trade talks aimed at extending a tariff truce and widening the discussions." (per BBG, see this link).
- The local data calendar is empty today.
OIL: US Crude & Gasoline Stocks Lower
Bloomberg reported that US oil inventories fell 577k barrels last week, while they rose 314k at Cushing, according to people familiar with the API data. There was a gasoline drawdown of 1.2mn but a distillate build of 3.5mn. The official EIA data is out Wednesday.
AUSSIE 3-YEAR TECHS: (U5) Core Rally
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.860 - High Apr 07
- PRICE: 96.620 @ 15:42 BST Jul 22
- SUP 1: 95.900 - Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures traded strong to start the week, buoyed by a global rally in core bonds. This again challenges resistance at 96.730, the Sep 17 ‘24 high, leaving 96.860 as the next key level. Instead, a continuation lower would strengthen a bearish theme. This would refocus attention on 95.760, the 14 Nov ‘24 low. Conversely, a reversal higher would refocus attention on 96.860, the Apr 7 high.
