AUD: AUD/USD - Pulls Backs As The USD Gets Some Relief

Bloomberg reported that there was a US crude inventory draw of 2.4mn barrels last week, more than offsetting last week’s 1.5mn build, but with only 100k at Cushing. Gasoline stocks fell 1mn barrels but distillate rose 500k, according to people familiar with the API data. The official data is out on Wednesday.

• 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: 96.580 @ 15:46 BST Aug 19
• 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 gapped sharply higher on the back of the recent soft US NFP data, and last week’s CPI print should also prove supportive. Recent price action has narrowed the gap with resistance at 96.730, the Sep 17 ‘24 high, leaving 96.860 as the next key level. Any continuation lower would instead 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.

Very low volatility persists for the yuan. USD/CNH sits near 7.1875 in early Wednesday dealings, after little movement in Tuesday's session. Broader USD indices were up for the session, albeit not at the same pace seen from Monday. Most of the USD gains were against higher beta FX, with weakness in US equities helping the move. Spot USD/CNY finished up at 7.1824, while the CNY CFETS basket tracker rose 0.13% to 96.20 (per BBG).

• Well worn ranges persist for USD/CNH as a catalyst for a range break remains absent. We sit close to the 20 and 50-day EMA points, while upside focus will rest with any retest above 7.2000. August lows at 7.1681 remain intact. 1 month implied USD/CNH vol is tracking towards 2024 lows, see the chart below.
• The Golden Dragon equity index fell 0.90% in US trade, but the China to global equity ratio sits close to late July highs, although this isn't providing much positive impetus to CNH at this stage.
• Via BBG: "Money managers are scaling back their bearish stance on China, adding technology and consumer stocks to their portfolios amid a four-month-long rally, according to an HSBC Holdings Plc survey." (see this link).
• US-CH government bond yield differentials remain within recent ranges. Note today we have the 1yr and 5yr loan prime rate decisions. No change is expected (1yr currently at 3.00%, 5yr at 3.50%), as these metrics have taken on less policy relevance over the past 12 months. 

Fig 1: USD/CNH Implied 1 month Volatility 

Source: Bloomberg Finance L.P./MNI