USD: BBDXY - Accelerates Above 1200, Can The USD Build On This ?
The BBDXY range overnight was 1200.14 - 1208.31, Asia is currently trading around 1206. The BBDXY surged higher with US yields in response to the CPI print. On the way down the BBDXY has been heavily sold every time it has challenged the 30 EMA on the Daily(See Chart Below), will the sellers again use this area to reload shorts or can the USD finally initiate some sort of a correction. The larger picture though still remains one of USD weakness and a sustained break above 1220 would be needed to begin challenging the shorts conviction.
- Otavio Costa on X: “The US dollar has strengthened over the past two weeks, largely as a result of positioning shifts from an extremely bearish stance. This tactical move is likely closer to the end than the beginning, in my view. I still believe we’re in the middle of a broader, structural downtrend in the dollar — one that’s far from over.”
- David Rosenberg on X: “There was a time when a +0.2% print on the Powell ‘super core’ inflation measure would have ignited a bond rally. Obviously not today, even though this metric has slowed to a mere +1.1% annual rate from January to June. All the market sees is the tariff effect starting to percolate through the goods sector – and more is to come. The question is the extent to which the moderation on the services front can continue to be relied on to provide an antidote - but the Fed clearly isn’t going to be taking any chances.”
- There is a broad consensus that the USD is set to embark on a decent move lower as the world reduces its exposure to the US and repatriates a lot of these flows. This consensus will also result in some decent short squeezes as a lot of the market is positioned the same way.
- Data/Events : Empire Manufacturing, CPI
Fig 1: BBDXY Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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MNI: CHINA PBOC CONDUCTS CNY242 BLN VIA 7-DAY REVERSE REPO MON
- CHINA PBOC CONDUCTS CNY242 BLN VIA 7-DAY REVERSE REPO MON
FOREX: AUD Crosses - Fail To Break Lower
The US stocks market continues to be very well supported on any dip. A market that was caught very short all the way up and has now been forced back in is very reticent to attempt to sell it again. Risk would need to break lower to see the AUD extend lower in the crosses.
- EUR/AUD - Friday night range 1.7737 - 1.7840, Asia is currently trading around 1.7790. The pair continues to comfortably hold above 1.7700. Support seen back towards 1.76/77 and while this holds focus should be on the 1.8000 area again.
- GBP/AUD - Friday night range 2.0852 - 2.0935, Asia is trading around 2.0900. Decent demand around 2.0850 on Friday night. A break above 2.1050 is needed to see the move higher once more gain momentum.
- AUD/JPY - Friday night range 92.91 - 93.87, Asia is trading around 93.50. The price has topped out again towards 94.00 this morning after a big bounce off 92.50 overnight. A break back below 91.50/92.00 is needed to see the move lower regain momentum and the focus turn back to the year's lows again.
AUD/NZD - Friday night range 1.0763 - 1.0792, the cross is dealing in Asia around 1.0770. A top looks in place now just above 1.0900, the cross topped out last week towards the 1.0800/25 sell area, the first target looks to be around 1.0650.
Fig 1: AUD/JPY spot Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
CHINA: Central Bank Injects CNY68.2bn via OMO
- The PBOC issued CNY242bn of 7-day reverse repo at 1.4% during this morning's operations.
- Today's maturities CNY173.8 bn
- Net liquidity injection CNY68.2 bn.
- The PBOC monitors and maintains liquidity in the interbank system through the issuance of reverse repo.
- The CFETS Pledged Repo Deposit Institutions 7 Day Weighted is at 1.41%, from prior close of 1.50%.
- The China overnight interbank repo rate is at 1.37%, from the prior close of 1.45%.
- The China 7-day interbank repo rate is at 1.50%, from the prior close of 1.50%.
