INDONESIA: Country Wrap: BI Expands Cooperation with PBOC
- The central banks of China and Indonesia are expanding their cooperation on local currency settlement to include portfolio investments, further promoting the use of the yuan and rupiah in trade and investment. The People's Bank of China and Bank Indonesia signed a memorandum of understanding to widen the scope of cooperation from current account and direct investment transactions to cover all transfers related to capital and financial accounts, the PBOC announced recently. The previous agreement was signed in September 2020. (source Yicai)
- Goldman Sachs has lowered its forecast for Indonesia’s fiscal deficit for this year to 2.5%, citing potential changes in how the government will account for a capital injection into a state-owned fund and lower projected costs for a much-discussed free lunch program. Although the government is likely to increase spending to stimulate short-term domestic growth, it may also “reduce other programs’ funding, such as the free lunch program, and utilize below-the-line capacity (for cash transfers to Danantara, for example),” analysts Rina Jio and Andrew Tilton write in a note The Wall Street bank had previously projected a fiscal deficit of 2.9% (source BBG)
- The Jakarta Composite did very little today also yet remains up over 6% month to date making it the best performer of the major markets.
- The rupiah fell today by -0.15% to be at 16,312
- Bonds saw yields edge higher with the 10YR at 6.83% (+1bps today)
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EURUSD TECHS: Corrective Pullback
- RES 4: 1.1696 1.618 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 3: 1.1625 1.500 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 2: 1.1608 High Nov 9 2021
- RES 1: 1.1573 High Apr 21 and the bull trigger
- PRICE: 1.1376 @ 06:10 BST Apr 28
- SUP 1: 1.1308 Low Apr 23
- SUP 2: 1.1217 20-day EMA and a key support
- SUP 3: 1.1144/0968 High Apr 3 / 50-day EMA and a pivot level
- SUP 4: 1.0805 Low Apr 3
The latest pullback in EURUSD is considered corrective and the trend structure remains bullish. Moving average studies are in a bull-mode position signalling a dominant uptrend, and the latest move down is allowing an overbought condition to unwind. A resumption of gains would open 1.1608 next, the Nov 9 2021 high. Key support is unchanged at the 20-day EMA, at 1.1217. A break of this average would signal scope for a deeper retracement.
AUSSIE BONDS: Richer A Data-Light Session, Q1 CPI On Wednesday
ACGBs (YM +3.0 & XM +5.0) are richer and near Sydney session highs on a data-light day.
- Cash US tsys are slightly mixed, with a flattening bias, in today's Asia-Pac session after Friday's solid gains.
- The focus of the week locally will be on Wednesday’s Q1 CPI, which is forecast to show the RBA’s preferred trimmed mean falling below the top of the 2-3% target band for the first time since Q4 2021. This should signal another 25bp cut on May 20. Retail sales are on Friday, and the Federal Election Saturday.
- Cash ACGBs are 4-7bps richer with the AU-US 10-year yield differential at -8bps.
- Swap rates are 6-8bps lower, with the 3s10s curve flatter.
- The bills strip has bull-flattened, with pricing -2 to +4.
- RBA-dated OIS pricing is flat to 5bps softer across meetings today. A 50bp rate cut in May is given a 12% probability, with a cumulative 118bps of easing priced by year-end.
- Tomorrow, the local calendar will see a speech from RBA Kent, Assistant Governor (Financial Markets) on Australia’s External Position and the Evolution of the FX Markets.
- The AOFM plans to sell A$1200mn of the 2.75% 21 June 2035 bond on Friday.
BUND TECHS: (M5) Bullish Structure
- 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: 132.03 High Apr 7 and the bull trigger
- PRICE: 131.67 @ 05:49 BST Apr 28
- SUP 1: 130.64/129.92 20-day EMA / 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
Bund futures are in consolidation mode and continue to trade just below their recent highs. A bull cycle remains in play and the pullback between Apr 7 - 9 is considered corrective. Attention is on resistance at 132.03, the Apr 7 high and a bull trigger. Clearance of this level would confirm a resumption of the uptrend and open 132.56, the Feb 28 high. Firm support lies at 128.60, the Apr 9 low. A break of this level would alter the picture.
