ASIA FX: CNH Steady Despite Trade Headlines, USD/KRW Supported On Dips
In North East Asia FX markets, CNH is little changed, despite seemingly positive US-China trade headlines. USD/KRW has been supported on dips, while TWD has outperformed. USD/HKD remains close to the top end of the peg band.
- USD/CNH spot hasn't spent too much time out of the 7.1850/7.1900 range so far in Wednesday trade. We had earlier US-China trade headlines, where the main take away was an agreement to implement the consensus from the Geneva talks (in May), subject to approval to leaders in both the US and China. China equities have recouped Tuesday losses, but are sub May highs.
- Spot USD/KRW sunk to the low 1360 region not long after the onshore, as local equities rallied over 1%. President Lee visiting the Korea Exchange today raised optimism around positive corporate governance news. Equities sit just off highs, but USD/KRW has rebounded back above 1370, threatening a downtrend channel, which has been in play since April this year. NPS reportedly no longer selling USD to hedge offshore investments has impact sentiment in the won space over the past 24 hours.
- Spot USD/TWD is holding at 29.90 in latest dealings, down marginally for the session. Taiwan equities have been buoyed by continuing strong momentum for tech bellwether TSMC, which is also aiding fresh inflows from offshore investors. For USD/TWD, earlier June lows rest close to 29.85.
- Spot USD/HKD remains supported, last near 7.8490.
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EURUSD TECHS: Corrective Phase Remains In Play
- RES 4: 1.1625 1.500 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 3: 1.1608 High Nov 9 2021
- RES 2: 1.1440/1573 High Apr 23 / 21 and the bull trigger
- RES 1: 1.1381 High May 2 - 6
- PRICE: 1.1229 @ 06:03 BST May 12
- SUP 1: 1.1186 Intraday low
- SUP 2: 1.1144 High Apr 3
- SUP 3: 1.1075 50-day EMA and a pivot level
- SUP 4: 1.0943 Low Apr 10
EURUSD maintains a softer short-term tone and the pair is trading at its recent lows. Recent weakness appears corrective and key trend signals remain bullish. However, the pair has traded through the 20-day EMA and this exposes the next important support at 1.1082, the 50-day EMA. On the upside, initial resistance to watch is 1.1381, the May 2 - 6 high. Clearance of this level would signal the end of the correction.
AUSSIE BONDS: Heavy Session To Start Week, Risk-On Weighs
ACGBs (YM -6.0 & XM -6.5) are sharply cheaper and near Sydney session lows.
- This move aligns with weaker US tsys, which are trading 2-4bps cheaper in today's Asia-Pac session, as risk bounces on US-China officials citing 'substantial progress' made from weekend trade talks.
- US Treasury Secretary Bessent said there had been 'substantial progress' in the two days of talks with China and that further details would be shared today.
- The US data calendar is light today, ahead of US CPI on Tuesday and Retail Sales on Thursday.
- (Bloomberg) -- “Hedge funds aggressively added to net short positioning in 10-year note futures, while asset managers boosted longs in the sector in the week up to May 6, CFTC data shows.”
- Cash ACGBs are 5bps cheaper with the AU-US 10-year yield differential at -6bps.
- The bills strip is cheaper with pricing -2 to -5 (late whites leading).
- RBA-dated OIS pricing is flat to 5bps firmer today, leaving meetings 2-24bps firmer than levels before the release of Q1 CPI data on April 30.
- Tomorrow, the local calendar will see Westpac Consumer and NAB Business Confidence measures.
- AOFM plans to sell A$1200mn of the 3.50% 21 December 2034 bond on Wednesday and A$800mn of the 2.50% 21 May 2030 bond on Friday.
BUND TECHS: (M5) Corrective Pullback Extends
- RES 4: 133.90 1.236 proj of the Mar 25 - Apr 7- 9 price swing
- RES 3: 133.00 round number resistance
- RES 2: 132.56 High Feb 28 and a key resistance
- RES 1: 131.72/132.03 High May 7 / High Apr 7 and the bull trigger
- PRICE: 130.33 @ 05:40 BST May 12
- SUP 1: 130.30/129.92 Intraday low / Low Apr 11
- SUP 2: 129.02 Low Apr 10
- SUP 3: 128.60 Low Apr 9 and a key support
- SUP 4: 128.47 Low Mar 28
A bull cycle in Bund futures remains intact and short-term weakness is considered corrective. However, the contract maintains a softer tone and has traded through support at the 50-day EMA, at 130.61. This signals scope for a deeper retracement and opens 129.92, the Apr 11 low. A reversal higher would highlight the end of the corrective phase. Attention would turn to key resistance and the bull trigger, at 132.03, the Apr 7 high.
