AUD: AUD/USD - Falls Back To 0.6950 As Silver Drags Risk Lower
The AUD/USD has had a range today of 0.6959 - 7007 in the Asia- Pac session, it is currently trading around 0.5965, -0.50%. The AUD got hit hard as traders looked for a proxy as Silver collapsed over 15%. The AUD has been outperforming across the board recently but leveraged funds who have no doubt added to their longs after the RBA’s hawkish hike will not be appreciating the pullback. On the day, price is testing the first buy-zone in the 0.6950-0.6980 area, if this does not hold we could see a deeper pullback toward 0.6850-0.6900 where I suspect buyers could be lining up first up. Should this first support give way the test of the pivotal 0.7100-0.7200 area will be delayed somewhat.
- Bloomberg - “The Reserve Bank of Australia may be forced to raise interest rates for a second consecutive time in March, according to Westpac Banking Corp. Chief Economist Luci Ellis, as the central bank embarks on the world’s first tightening cycle of 2026.”
- "AUSTRALIA DEC. EXPORTS RISE 1.0% M/M, IMPORTS FALL 0.8% M/M. TRADE SURPLUS A$3.373B; EST. A$3.500B" - BBG
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6850(AUD886m). Upcoming Close Strikes : 0.6900(AUD1.74b Feb 9), 0.6900(AUD1.22b Feb 10), 0.7100(AUD1.09b Feb 10) - BBG
- The AUD/USD Average True Range for the last 10 Trading days: 82 Points
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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JGBS AUCTION: Weakish Auction Result For 10Y
The 10-year JGB auction delivered weakish results, with the low price failing to meet expectations at 100.00, according to the Bloomberg dealer poll. Moreover, the cover ratio decreased to 3.3037x from 3.5913x and the tail lengthened to 0.05 from 0.04.
- This performance came despite an outright yield at a fresh cycle high, around 25bps higher than the level of last month's auction.
- The 2s/10s yield curve had steepened further since last month’s auction and sat at around the cycle high.
- That said, BOJ Governor Kazuo Ueda’s hawkish comments yesterday may have impacted today result at the margin.
- In early afternoon Tokyo trading, the cash 10-year and JGB futures are dealing modestly cheaper.
Bloomberg Finance LP
JGBS AUCTION: 10-Year JGB Auction Results
The Japanese Ministry of Finance (MoF) sells Y1,958.5bn 10-Year JGBs:
- Average Yield: 2.095% (prev. 1.872%)
- Average Price: 100.04 (prev. 98.57)
- High Yield: 2.101% (prev. 1.877%)
- Low price: 99.99 (prev. 98.53)
- % Allotted At High Yield: 90.6569% (prev. 21.1502%)
- Bid/Cover: 3.3037x (prev. 3.5913x)
CHINA: Bonds Lower as Liquidity Removal Continues
- With the PBOC withdrawing liquidity again this morning during the OMO, the year to date withdrawal has topped CNY1tn already.
- Bonds are weak today post the OMO as all major equity bourses rally.
- The 10-Yr future is down -0.135 to 107.70, slipping further below all major moving averages.
- The 2-Yr future is down -0.04 to 102.37, also retreating further below all major moving averages.
- Cash is steady with the 2-Yr at 1.377% and the 10-Yr up +1.5bps at 1.87%, it's highest over the last month.
- As of Dec. 31, regional government issuers had disclosed plans to issue over 2.1 trillion yuan of local bonds in the first quarter as regional authorities move to support major construction projects, Shanghai Securities News reported (per BBG) with strong issuance kicking off this week.
- An expectation of fiscally proactive policies and focus on infrastructure to support growth will see key support coming from the Central Government for the regions to expedite their issuance needs.
