USD: BBDXY - Correction Stalls With Powell Sacking Rumour, Is That All It Takes?
The BBDXY range overnight was 1198.82 - 1210.13, Asia is currently trading around 1206. The USD had a bit of a roller coaster of a ride yesterday as rumours of a potential Powell sacking gained traction, this was later denied by Trump, though he also left the door open to Powell being dismissed for fraud. What is clear from the price action is the market is very quick to sell USD’s again if given the excuse, is the mere threat of Powell being dismissed enough to turn the USD lower again. 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.” See Graph Below.
- Robin Brooks on X: “The Dollar is having a moment. It's up almost 2% so far this month and there's an important lesson in that. Markets don't care about tariff headlines unless they're about China. Everyone else is just along for the ride.”
- (Bloomberg)- The narrative around a long-term decline in the dollar has found fresh fuel from renewed concern about political interference in US monetary policy. The mere revival of discussions - however implausible legally - around firing Federal Reserve Chair Jerome Powell has reintroduced a key bearish catalyst for the dollar.
- 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 :Retail Sales, Initial Jobless claims, Philly Fed Buss Outlook, NAHB Housing Market Index
Fig 1: US Dollar Cycles
Source: MNI/@TaviCosta
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ASIA STOCKS: Outflows Increasing Across Major Markets
After a strong period of inflows, recent days have seen outflows beginning to become more consistent.
- South Korea: Recorded outflows of -$151m yesterday, bringing the 5-day total to +$812m. 2025 to date flows are -$7,928. The 5-day average is +$162m, the 20-day average is +$171m and the 100-day average of -$81m.
- Taiwan: Had outflows of -$29m as of yesterday, with total inflows of +$2209 m over the past 5 days. YTD flows are negative at -$10,402. The 5-day average is +$442m, the 20-day average of +$34m and the 100-day average of -$103m.
- India: Had outflows of -$43m as of the 13th, with total inflows of +$200m over the past 5 days. YTD flows are negative -$10,620m. The 5-day average is +$40m, the 20-day average of -$70m and the 100-day average of -$85m.
- Indonesia: Had outflows of -$9m yesterday, with total inflows of +$72m over the prior five days. YTD flows are negative -$2,943m. The 5-day average is +$14m, the 20-day average +$15m and the 100-day average -$29m.
- Thailand: Recorded outflows of -$109m as of yesterday, with outflows totaling -$85m over the past 5 days. YTD flows are negative at -$2,256m. The 5-day average is -$17m, the 20-day average of -$27m and the 100-day average of -$21m.
- Malaysia: Recorded outflows of -$31m as of yesterday, totaling -$127m over the past 5 days. YTD flows are negative at -$3,650m. The 5-day average is -$27m, the 20-day average of -$29m and the 100-day average of -$23m.
- Philippines: Saw outflows of -$49m yesterday, with net outflows of -$51m over the past 5 days. YTD flows are negative at -$564m. The 5-day average is -$10m, the 20-day average of -$17m the 100-day average of -$5m.
FOREX: AUD Crosses - Shorts Conviction Being Challenged
This morning's post by President Trump that everyone should evacuate Tehran immediately has seen stocks open soft in our session, if something significant is not seen the danger is this move will also just be reversed. ESU5 -0.40%, NQU5 -0.45%. The AUD has drifted lower back towards 0.6500 on this reaction -0.15%.
- EUR/AUD - Overnight range 1.7690 - 1.7802, Asia is currently trading around 1.7740. The pair is drifting back towards the support around the 1.76/77 area and while this holds the markets focus will be on testing the 1.8000 area again.
- GBP/AUD - Overnight range 2.0775 - 2.0897, Asia is trading around 2.0830. This pair is back in its 2.0500-2.1050 range. A break above 2.1050 is needed to see the move higher once more gain momentum. If the AUD/USD does start to break higher this could see this air drift back to the 2.0500 area.
- AUD/JPY - Overnight range 93.56 - 94.55, Asia is trading around 94.40. Choppy price action as the pair establishes a range between 92.00 - 96.00. 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 - Overnight range 1.0761 - 1.0795, the cross is dealing in Asia around 1.0760. 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: GBP/AUD spot Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
CHINA: Central Bank Withdraws CNY1.3bn via OMO
- The PBOC issued CNY197.3bn of 7-day reverse repo at 1.4% during this morning's operations.
- Today's maturities CNY198.6 bn
- Net liquidity withdrawal CNY1.3 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 1.52%.
- The China overnight interbank repo rate is at 1.38%, from the prior close of 1.38%.
- The China 7-day interbank repo rate is at 1.41%, from the prior close of 1.55%.
