AUD: AUD/USD - Falls On US CPI, Looking To Test 0.6480 Support Area

Oil jumped on the first Israeli strikes against Iran in early Friday APAC trading but then eased substantially but still finished up around 8% on the day. On the weekend the situation escalated with Israel targeting Iran’s oil and gas infrastructure, which has pushed crude higher again at the start of today’s session with WTI up 2.9% to $75.06/bbl but peaked at $77.49. Strikes between the two continued unabated over the weekend. The USD index rose 0.2%.

• Israel struck the Shahran fuel depot and Shahr Rey refinery in Tehran destroying both but has avoided the Kharg Island terminal so far which is Iran’s main oil export facility and would also disrupt shipments from the UAE and Saudi Arabia having significant impact on oil prices, according to The Australian. The NY Times has said that the oil ministry office in Tehran was struck likely as an attack on engineering resources.
• The destruction of oil infrastructure is a major blow to Iran as not only does it impact its revenue flows in the near-term but repairing and rebuilding is a long-term process. The risk is that it retaliated by closing the Strait of Hormuz which 30% of global seaborne oil transits through.
• WTI rose 7.6% to $73.18/bbl on Friday after reaching a high of $77.62 early in APAC trading. It is now up 24.6% this month.
• Brent was 8.4% higher at $75.18/bbl but off the intraday high of $78.50 and has started today up 3.4% to about $76.74 after rising to $78.32 initially. It is around 22% higher in June. The bull cycle remains in play and Friday’s intraday high is now initial resistance. Technicals are signalling that the trend is currently in an extreme overbought position.

CNH lost a little over 0.20% for Friday's session, in line with a modest recovery in USD indices for the session (BBDXY +0.21%, DXY +0.27%). USD/CNH tracks near 7.1880 in early Monday dealings, still comfortably within recent ranges. Spot USD/CNY finished up at 7.1832, while the CNY CFETS basket tracker fell to 95.49, down 0.22% (per BBG), which is a fresh cycle low for the index. 

• For USD/CNH spot we remain wedged under the 20-day EMA (near 7.1950) for now. Upside focus is likely to rest on the 100 and 200-day EMA resistance points, both near 7.2400. On the downside, earlier June lows were at 7.1645.
• Near term focus may rest with developments in the Middle East and spill over risks to energy prices. The US terms of trade have a positive correlation with energy prices, which could aid broader USD sentiment. The rough sell-side consensus is that any USD rebound is unlikely to change the longer term downtrend though.
• For USD/CNH, we would expect the pair to maintain a low beta with respect to broader USD index shifts. The bias still appears to be for CNY basket weakness though.
• Note on the data calendar today we have May home price data, along with May monthly activity figures. Forecasts for activity figures don't point to a sharp shift from momentum in April. 

The AUD had a range Friday night of 0.6462 - 0.6520, Asia is opening around 0.6480. The AUD found decent demand once again on the dip back towards the 0.6450 area. The USD tried to bounce as a safe haven but really struggled to hold onto its gains falling away into the close once again.

• (Bloomberg) -- Australia’s Prime Minister Anthony Albanese said he is scheduled to meet US President Donald Trump on Tuesday during the G-7 summit in Canada. “I’m going to raise the tariffs,” Albanese told reporters during a stopover in Seattle. “We’ll raise the importance of Aukus and have a discussion as two friends should.” 
• The AUD did well to hold above 0.6450 as risk came under pressure during the Friday Asian session. The USD is still struggling to find any traction and as a result it still probably makes more sense to express AUD weakness via the crosses until that changes.
• Price remains in the 0.6350 - 0.6550 range, a sustained break above 0.6550 is needed for the move higher to accelerate. It's in the crosses the AUD continues to underperform.
• Expect buyers to continue to be around on dips while the support in the AUD/USD holds, a close back below 0.6350 is needed to challenge the newly formed uptrend. 
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6560(AUD549m), 0.6455(AUD476m). Upcoming Close Strikes : 0.6600(AUD 974m June 18)

• CFTC Data shows Asset managers maintaining their shorts, the Leveraged community though continued to build up their shorts again.

  Fig 1: AUD CFTC Position

  

  Source: MNI - Market News/Bloomberg Finance L.P