JGBS: Bear-Steepener, Oil Remains The Main Focus

• Weaker than expected overnight data in the US sees gold holding above $5,000 today as investors position for rate cuts in the US.  
• Gold has generally trended higher today in Asia, up +0.80% at US$5,058 - trading in a $5,026 - $5,060 range.  
• Gold may climb to $6,000 an ounce by the end of the year  as macroeconomic and geopolitical risks persist, according to BNP research (per BBG).  This is one of the highest forecasts for gold with ranges of around $5,000 to $6,000 most prevalent.  
• Gold short term momentum still remains bearish according to the MACD with the MACD (white) line below the Signal (red) line, a bearish sign.  
• The volatility this month for gold seems far from over as we look ahead to non farm payrolls for a steer on US interest rates and the Trump and Netanyahu meeting on Iran.  

The NZD/USD had a range today of 0.6037-0.6066 in the Asia-Pac session, it is currently trading around 0.6065, +0.33%. The NZD is pushing above its overnight highs that saw its momentum stall as the USD trades poorly into NFP. On the day, the NZD bulls will be hoping the pair can maintain its upward momentum to test the pivotal 0.6100 area. The first support is back toward 0.6025-0.6045 and then the 0.5900-0.5950 area. A sustained break back above 0.6100 could potentially open up a move back toward the 0.6400-0.6600 area and then beyond.

• MNI -  Westpac Expects RBNZ To Raise Rates More Quickly In 2027: Westpac now expects the RBNZ to raise rates more quickly in 2027 (as spare capacity is exhausted). It maintains the start of the hiking cycle is expected in Dec of this year. The next RBNZ meeting is on Feb 18, next Wednesday. Market pricing, per OIS markets, is very flat for the first few meetings this year (around 2.25%, the current target rate). A full 25bps hike is priced by around the Oct meeting this year.
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5900(NZD301m Feb16), 0.6200(NZD430m Feb 16) - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 61 Points

Fig 1: NZD/USD Spot Weekly Chart

Source: MNI - Market News/Bloomberg Finance L.P

The USD/JPY range today has been 153.51 - 154.52 in the Asia-Pac session, it is currently trading around 153.55, -0.55%. USD/JPY could not bounce at all and was back under pressure from the open and has remained so all through our session. The price action on Monday in response to the election outcome showed it was mostly priced in, and we have seen some “buy the rumour, sell the fact” play out. I thought we would see better demand back toward the 155.00 area initially but this move in US yields is causing the Yen shorts some angst. This price action does look messy but I still believe dips back toward the 149-152 will probably provide solid support again should we see it, until then it looks like we chop around albeit with a heavy tone as we await tonight's US labour data which will directly impact that move in US yields. On the day, the first resistance is back towards 154.75-155.15 and then the 155.80-156.20 area as the market pares back its USD longs and looks for another base to from from which to move higher again.

• “Deutsche Bank strategists said they’re no longer bearish on the yen after PM Sanae Takaichi’s election victory.” - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 156.50($1.16b), 156.60($550mm). Upcoming Close Strikes : 158.50($1.57b Feb 13), 159.00($1.91b Feb 13),160.00($3.06b Feb 13) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 154 Points

Fig 1 : US 10-Year Yield Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P