THAILAND: Confidence Consistent With Slowing Growth, BoT Likely To Cut

The BBDXY has had a range of 1202.47 - 1204.11 in the Asia-Pac session, it is currently trading around 1203, +0.10%. The USD was again surprisingly able to shrug off the extension lower in US yields and found solid demand below 1200 helping it keep the support in place for now. A sustained break below 1197/1195 is needed to regain the momentum lower and retest the year's lows.

• EUR/USD -  Asian range 1.1704 - 1.1721, Asia is currently trading 1.1715. The pair bounced on Friday in response to the NFP but momentum stalled into the close. EUR trades firmly within its wider 1.1350-1.1850 range with a bias to the topside.
• GBP/USD - Asian range 1.3483 - 1.3506, Asia is currently dealing around 1.3495. The pair bounced strongly off its support around 1.3350 last week. The move above 1.3500 on NFP has stalled but price is now back in the middle of its 1.3350-1.3650 range. A sustained break below 1.3350 is needed to open up a move back to 1.3100. 
• USD/CNH - Asian range 7.1244 - 7.1283, the USD/CNY fix printed 7.1029, Asia is currently dealing around 7.1325. Sellers should be around on bounces while price holds below the 7.2200/2500 area and the PBOC manages the fix lower. Above 7.2500 and we could see a test of the USD Shorts.
• Cross asset : SPX +0.10%, Gold $3581, US 10-Year 4.10%, BBDXY 1203, Crude Oil $62.58
• Data/Events : EZ Sentix Investor Confidence, Germany Industrial Production/Trade Balance

Fig 1: BBDXY Spot 2H Chart

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

The NZD/USD had a range of 0.5883 - 0.5904 in the Asia-Pac session, going into the London open trading around 0.5900, +0.12%.  The NZD pushed higher in reaction to the NFP but found good selling above 0.5900 capping the move for now. This 0.5900-0.5950 area presents a good opportunity to fade for those who are bearish the NZD, but the caveat to this trade remains the USD’s ability to not break down. CFTC Data shows light positioning in a market that is struggling for a strong trend.

• Q2 manufacturing data print Tuesday including volumes. Manufacturing volumes rose 2.4% q/q in Q1. Q2 GDP prints on September 18, which the RBNZ expected to fall 0.3% q/q in its August projections.
• Bloomberg - “Dollar Vulnerability Turns to Downtrend on Payroll Miss. Further dollar weakness looks inevitable, with soft jobs data and falling rate expectations reinforcing the case for sustained downside. Together, easier Fed policy and the potential return of passive hedging flows create a feedback loop that makes sustained dollar strength increasingly difficult to justify.”
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5800(NZD515m Sept 10), 0.5870(NZD320m Sept 10) - BBG
• CFTC Data of last week shows Asset Managers added slightly to their new short position in the NZD -5127(Last -4743), the Leveraged community have completely exited their short and have turned a fraction long +285(Last -225).
• AUD/NZD range for the session has been 1.1115 - 1.1133, currently trading 1.1120. The Cross is consolidating above 1.1100, dips back towards 1.1000/1.1050 should be supported now.

Fig 1: NZD CFTC Data

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

JGB futures sit at 137.98, +.02 versus settlement levels in latest dealings. We are away from Friday highs (138.37), but dips under 138.00 have been support so far today.  

• Focus remains on who will be the new PM, after Ishiba decided to step down over the weekend. Local media report that the leadership election may be held on Oct 4 (per TBS via BBG). An official announcement is expected tomorrow. A number candidates are likely to put their names forward.
• When Ishiba secured the PM position last Oct, the runner up was Sanae Takaichi. Via ABC news: "A Nikkei survey held at the end of August put Ms Takaichi as the most "fitting" successor to Ishiba." Takaichi could arguably generate the most significant market reaction if she is successful becoming the new PM, as she has been outspoken in terms of being more dovish in terms of the BoJ outlook and looking to boost fiscal spending. Former Minister, Toshimitsu Motegi, will reportedly run.
• Earlier on the data front, we had Q2 GDP revisions, which were firmer than market expectations. Stronger private consumption offset weaker capital investment the data showed.
• The cash JGB 2/30s curve is steeper, but away from session highs (+245bps) We were last +243bps. The outright 10yr yield is little changed, last near 1.575%.
• In the swap space, the move in 20-40yr rates has been larger than the cash JGB yield move. The 30yr is up around 5bps, last near 2.52%.
• Tomorrow on the data front, we have August money stock figures and August machine tool orders.