AUD: AUD/USD - Looking To Test Higher
The AUD had a range overnight of 0.6477 - 0.6534, Asia is opening around 0.6530. The AUD found decent demand once again just below 0.6500, the USD is under extreme pressure and the AUD looks to be eyeing a break back above 0.6550/0.6600 which could signal the start of a broader move higher.
- (Bloomberg) -- “The global economic system is in flux and what will emerge is difficult to predict, a senior official at the Reserve Bank of Australia said Thursday, adding that policymakers should be prepared for “periods of volatility and market disruption.”
- The AUD has still not broken above 0.6550 even with the USD being sold across the board, demand has been noted again sub 0.6500. With the USD sell-off looking like it is beginning to accelerate the odds look good that it has a look above there at some point.
- 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 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: 0.6500(AUD450m). Upcoming Close Strikes : 0.6560(AUD 549m June 16), 0.6455(AUD426m June 16)
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
AUSSIE 10-YEAR TECHS: (M5) Remains Toward Top End of Recent Range
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.520 @ 16:40 BST May 13
- SUP 1: 95.420/95.300 - Low Feb 13 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.819 - 1.0% 10-dma envelope
Aussie 10-yr futures extended a recent strong bounce through to the Friday close, putting prices through the top end of the recent range. The confirmed breach of 95.851, the Dec 11 high on the continuation contract, reinstates a bull cycle and focuses attention on resistance at 96.207, a Fibonacci retracement point. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
US TSYS: 10-Year Yield Tests 4.50% Overnight
TYM5 reopens at 110-04, up 0-05 from closing levels in today’s Asia-Pac session.
- Overnight US 10-year yields had a range of 4.4197% - 4.5026%, closing around 4.46%.
- Treasury yields ended slightly lower overnight, with the yield curve steepening (2s10s +0.63 at 46.068).
- MNI US Data - There is little in this report alone to suggest a meaningful gap between CPI and PCE - in other words, the slight downside miss in core CPI doesn't carry a major re-interpretation for PCE via the components. Note April core PCE consensus was 0.24% M/M coming into today, and while this may dip slightly we doubt forecasts will be radically changed (core CPI came in at 0.22% M/M).
- As for broader trends, the core CPI six-month rate held at 3.0% annualized for a second month in April having moderated from 3.7% in January, although it’s still a fourth consecutive month above the Y/Y.
The 10-year Yield range seems to be 4.10% - 4.5%, price is currently testing the upper bound of the range around 4.50%. A sustained break above this level would see another round of selling targeting the 4.75% area.
AUD: AUD/USD - Benefits From Higher Risk And China
The AUD had a range overnight of 0.6401 - 0.6479, Asia is opening around 0.6465. US Stocks have extended their push higher, the AUD has benefited from this as well as being used as a China-proxy.
- (Bloomberg) -- "Chinese President Xi Jinping told Australian Prime Minister Anthony Albanese that deepening bilateral cooperation is important for the two nations’ joint development, as well as promoting world peace and stability, according to the official Xinhua News Agency."
- “Traders are winding back bets on aggressive monetary easing by Australia in a cascading effect from the US and China agreeing to temporarily lower tariffs on each other’s products, write BN’s Matthew Burgess and Swati Pandey. Money market pricing now implies the RBA will only cut interest rates three times this year, including one next Tuesday. Just four weeks ago, when US President Donald Trump’s massive tariffs on China threatened to send the world economy into a tailspin, markets were anticipating at least five RBA cuts with a decent chance of a sixth.”(BBG)
- The AUD/USD once more found good demand sub 0.6400 and has since bounced nicely with the double whammy of risk moving higher and the market buying the AUD as a proxy for China.
- Key Support in the AUD is back towards 0.6300 a close back below here would start to challenge the newly formed uptrend. While this holds the market should continue to find demand on dips.
- CFTC Data shows Asset managers have started to build shorts again after paring them almost back to 0, the Leveraged community reduced their shorts again last week.
Data/Event: Wage Index, Home Loans Value
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg
