CNH: CNH Lower As US Yields Rise Post NFP Beat, But 20-day EMA Resistance Intact
From sub 7.1600, USD/CNH spike higher following the stronger than expected US NFP report. We couldn't get back above 7.1750 though and we track near 7.1690 in early Friday dealings. CNH lost close to 0.15% for Thursday's session, compared with a 0.36% rise in the DXY index (the BBDXY rose 0.23%). Spot USD/CNY finished up at 7.1706, while CNY CFETS basket tracker edged a little higher to 95.16.
- For spot USD/CNH, resistance around the 20-day EMA (near 7.1760) remains intact for now. Still, the market may not get excited about further meaningful USD upside until we test above the 50-day EMA, which sits just under 7.2000.
- Front end US Tsy yields rose notable on Thursday, the 2yr up 9.5bps to 3.88% (with the move coming post the NFP beat). This weighed on most of the majors, notably yen, which lost close to 0.90% versus the USD. CNH/JPY is back above 20.21 this morning, against recent lows sub 20.00. EUR/CNH is back around the 8.4270 level.
- China's Ministry of Commerce announced late yesterday it would examine the details of the trade deal between the US and Vietnam and would act to protect its interests if needed. Via BBG: "“If such a situation arises, China will firmly strike back to protect its own legitimate rights and interests,” she added, without elaborating on what those steps would entail." (see this link).
- The local data calendar is empty today with FX reserves for June due next Monday.
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AUSSIE 10-YEAR TECHS: (M5) Bear Cycle Remains Intact For Now
- 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: 95.755 @ 16:09 BST Jun 03
- 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 rallied well on the RBA rate decision, reversing a small part of recent weakness. Recent price action pressured prices through to new pullback lows last week. 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. To the upside, a recovery of recent losses would shift attention to resistance at 96.207, a Fibonacci retracement point.
OIL: Industry Data Shows Crude Destock As Product Inventories Rise
Bloomberg reported that there was a crude destocking of 3.289mn barrels last week, according to people familiar with the API data. They rose 952k though at Oklahoma’s Cushing hub. Product inventories rose strongly with gasoline up 4.73mn and distillate +761k barrels. The official EIA data is out Wednesday.
US TSYS: 10-Year Yield Trying To Build a Base
TYU5 reopens at 110-16+, up 0-02 from closing levels in today’s Asia-Pac session.
- Friday night the US 10-year yield had a range of 4.4043% - 4.4716%, closing around 4.45%.
- Treasury yields ended a little higher across the board overnight, yield curves ended relatively unchanged(2s10s -0.27 at 49.85, 5s30s -0.02 at 95.84).
- MNI US DATA: The JOLTS report for April was on balance one of relative stability in another look at early reaction to Trump administration policies. Job openings surprisingly increased (7391k (sa, cons 7100k) in April after a marginal upward revised 7200k (initial 7192k) in March) whilst the hire rate pushed to its highest since September although the quits rate pushed back lower again after what to us was a surprising uptick back in March.
- MNI US DATA: Factory orders came in weaker than expected in April, with the 3.7% M/M contraction exceeding the 3.2% drop expected by consensus. Ex-transport orders told the same story: -0.5% in April (+0.2% expected), failing to improve from March's -0.5%. This marked the biggest monthly pullback in manufacturing orders in 15 months, and more than reversed March's rise to put manufacturing orders only slightly higher than in sequential. Clearly, there was some pulling-forward of orders in March, ahead of anticipated tariff impacts.
- The 10-year yield continues to find good support around 4.35/40%. Yields need to hold above this area to continue to build for a move higher.
