AUD: AUD/USD - Trying To Break Higher, Looking To Extend Above 0.6650
The AUD/USD had a range overnight of 0.6591-0.6665, Asia is trading around 0.6660. US stocks loved the data and accelerated higher, while US yields most notably in the long-end continued lower. The AUD liked that combination and is looking to break above its pivotal 0.6650 resistance. Should the USD break and extend lower we could see the AUD gain momentum above 0.6650 and potentially target levels back towards 0.6900/0.7000. This price action suggests dips will be supported for now as we await confirmation of this potential break higher.
- MNI INTERVIEW: Wages To Limit RBA Easing - Ex Research Chief. Trimmed-mean inflation is likely to remain near the top of the Reserve Bank of Australia’s 2-3% target if wages outpace its assumptions despite its recent productivity downgrade, the RBA’s former head of research told MNI, noting this would limit the degree of further easing.
- (Bloomberg) -- “JPMorgan Private Bank sees scope for the dollar to weaken against currencies like the Aussie and euro. Diversification out of the US currency and repatriation forces will still play out in markets, though they’re a longer-term story. Sees potential for Aussie dollar to strengthen to the 68 US cents level by mid-2026 and for gold to continue outperforming.”
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6570(AUD383m), 0.6575(AUD377m). Upcoming Close Strikes : 0.6600(AUD449m Sept 16) - BBG
- Data/Event: RBA Assistant Governor Brad Jones speaks on a panel at FINSIA’s The Regulators event in Sydney.
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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AUSSIE 10-YEAR TECHS: (U5) Spikes With Treasuries
- 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: 95.710 @ 15:52 BST Aug 12
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed both the recent poor NFP print as well as Tuesday’s inflation number. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
US TSYS: Yields End Mixed, The Front-End Moves Lower
TYU5 reopens at 111-26, unchanged from closing levels in today’s Asia-Pac session.
- Overnight the US 10-year yield had a range of 4.2384% - 4.3160%, closing around 4.289%.
- Treasury yields ended mixed overnight; with the front-end moving lower, this saw the yield curve steepen (2s10s +4.15 at 55.586, 5s30s +4.02 at 105.443).
- Nick Timiraos on X: “Treasury Secretary Scott Bessent suggested that the Fed should consider cutting interest rates by a half percentage point at its September meeting in light of recent labor-market data showing a slower pace of job growth.”
- Mohamed A.El-Erian on X: “There’s a simple reason why this CPI inflation release is unlikely to produce a consensus assessment — whether among those who drill down to the third decimal of the monthly estimate or those who believe the annual figures carry more insight: The headline and core numbers diverged, both in absolute terms and relative to consensus forecasts. This won’t matter much for equities, given their current inclination to focus on the glass-half-full side of the economic picture.”
- Price action in the long-end is a little disconcerting for the bulls though it still trades below its 4.30/35%% pivot within the wider range 4.10% - 4.65%. There should still be buyers of treasuries on bounces back towards 4.30/35%, looking to initially test the 4.10% area.
Fig 1: 10-Year US Yield 2H Chart
Source: MNI - Market News/Bloomberg Finance L.P
AUD: AUD/USD - Bounces With Risk, USD Sellers Return
The AUD/USD had a range overnight of 0.6482-0.6540, Asia is trading around 0.6530. US equities roared higher as the market got ready for more rate cuts, the slight reprieve for the USD going into the CPI print was quickly reversed and more cuts being priced in will increase the pressure on an already bearish market. I felt the bounce back towards 0.6550 offered a good risk/reward to fade initially but if the US starts pricing in more aggressive cuts the AUD will probably see demand. The Price remains in the 0.6350-0.6650 range, after the US CPI can it test the upper end of it ?
- Nick Timiraos on X: “Treasury Secretary Scott Bessent suggested that the Fed should consider cutting interest rates by a half percentage point at its September meeting in light of recent labor-market data showing a slower pace of job growth.”
- Bloomberg - “The Reserve Bank of Australia’s latest step on its gradual easing path won’t be its last, writes Bloomberg Economics. The central bank’s downgraded growth outlook incorporates some of the uncertainty impact on households and businesses, while acknowledging the lingering risk of a pullback in demand. Further rate cuts will be needed.”
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6575(AUD746m), 0.6550(AUD597m). Upcoming Close Strikes : 0.6600(AUD1.25b Aug 14), 0.6690(AUD583m Aug 14), 0.6523(AUD562m Aug15) - BBG
- CFTC Data shows Asset managers added to their shorts -60729(Last -49183), the Leveraged community added very slightly to their own shorts -13997(Last -13823).
- Data/Event: Wage Price Index, Home Loans Value
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
