AUSSIE BONDS: Cheaper Ahead Of US Payrolls

The NZD/USD had a range of 0.6090 - 0.6106 in the Asia-Pac session, going into the London open trading around 0.6100, +0.05%. A tight range in a relatively quiet Asian session, US Equity futures have also drifted higher in Asia, ESU5 +0.30%, NQU5 +0.38%. The pair is breaking through its recent highs and attempting to build momentum for a potential look back towards the 0.6400/0.6500 area. The relentless pressure on the USD is providing a tailwind and dips towards 0.6000 should continue to see demand. The market will be eyeing NFP on Thursday so there is a good chance we will consolidate until we see if that gives the USD a further nudge lower. 

• (Bloomberg) -- “Donald Trump said he’s not considering delaying his July 9 deadline for higher tariffs to resume. He sees a Japan deal as unlikely, saying it should be forced to pay a rate of “whatever the number is that we determine.”
• Whole Milk Prices Nearly 12% Off May Highs : Overnight the whole milk price auction saw a sharp fall. We fell to $3859 from $4084 prior, which was a 5.1% drop between the two auctions. The whole milk price is off close to 12% from its highs at the start of May.
• A huge bounce from sub 0.5900 and the NZD has now established a foothold above 0.6000, with the USD breaking lower the NZD/USD looks to be building for a potential break higher of its own.  A clear break of 0.6100 could provide the momentum to begin a larger move higher, initially targeting the 0.6400/0.6500 area.
• CFTC Data shows Asset Managers have cut their shorts and are now beginning to build a long in NZD +12195, the Leveraged community maintained their short that had just been added to -11981.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5800(649m). Upcoming Close Strikes : none.
• AUD/NZD range for the session has been 1.0777 - 1.0796, currently trading 1.0780. The cross is struggling to get any momentum for now. It looks to be in a 1.0750 - 1.0850 range for now as it awaits a catalyst to provide some clearer direction.

Fig 1: NZD/USD Spot Daily Chart

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

The Asia-Pac USD/JPY range has been 143.32 - 143.75, Asia is currently trading around 143.60, +0.15%. USD/JPY has traded sideways in our session. This pair continues to trade with an offered bias, first resistance is back towards 144.50/145.00 and there should be sellers again eager to participate towards that level. The market will be waiting for NFP on Thursday to provide a potential catalyst to test the 142.00/140.00 area once more.

• (Bloomberg) -- “Japan will continue actively negotiating tariffs in good faith with the US for both countries' mutual benefit, Deputy Chief Cabinet Secretary Kazuhiko Aoki says at a regular press conference on Wednesday.”
• “Japan's super-long bonds are set to remain under pressure in the medium term as local life insurers may offload holdings to sidestep impairment losses on deeply discounted debt.” (per BBG)
• "ISHIBA: TALKS WITH US  SEEM MORE ABOUT INVESTMENT THAN TARIFFS” - BBG
• The rejection of 148.00 points to a potential top being in place now and shows just how quick the market is to return to selling USD’s. USD/JPY is looking for a fresh catalyst to probe the lower end of its range again, can the NFP on Thursday provide that ?
• Options : Close significant option expiries for NY cut, based on DTCC data: 144.00($598m), 144.75(698m).Upcoming Close Strikes : 140.00($1.04b July3).

Fig 1 : USD/JPY Spot Hourly Chart

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

The AUD/USD has had a range of 0.6565 - 0.6583 in the Asia- Pac session, it is currently trading around 0.6583. The pair tested lower on the back of a lower than expected retail sale sprint, bids emerged back around 0.6560 and the pair has erased all of its losses going into London. US Equity futures have drifted higher in Asia, ESU5 +0.30%, NQU5 +0.35%.  The market will be watching for signs of this move building upward momentum for a more significant move higher, could the catalyst be NFP on Thursday ?

• Australian retail sales rose a modest 0.2%m/m in May, after a revised flat outcome in April (originally reported as a -0.1% dip). The market consensus for the May outcome was a +0.5% rise. Other data showed May building approvals up 3.2%m/m, which was slightly below the 4.0% forecast. The April fall was revised to -4.1%m/m.
• (Bloomberg) -- Weak retail sales confirm our concerns about Australia’s consumers, who are keeping their wallets shut despite the Reserve Bank starting rate cuts in February and May. So far, there’s little sign the moves are reviving spending, and a stronger rebound likely hinges on additional easing.
• The AUD/USD is breaking through the top of its recent range as the pressure on the USD increases. First support is seen back towards 0.6500.
• The AUD needs a sustained break above 0.6550/0.6600 to potentially start building momentum for an extended move higher, a close back above 0.6600 and the focus would turn back to 0.6900/0.7000.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6550(AUD654m). Upcoming Close Strikes : 0.6600(AUD2.55bm July4).
• AUD/JPY - Today's range 94.30 - 94.53, it is trading currently around 94.50, +0.1%. Choppy price action as the pair establishes a range between 92.00 - 96.00. Momentum higher seems to be stalling, a break sub 0.9350 would be needed to see the focus turn lower once more.

Fig 1: AUD/USD spot Daily Chart

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