CHINA: Country Wrap: Home Sales Slump Further
- China’s home sales extended their slump in July as declining prices failed to attract buyers, buttressing speculation about fresh measures to support the market. The value of new-home sales by the 100 largest property companies dropped 24% from a year earlier to 211.2 billion yuan ($29.3 billion), according to preliminary data from China Real Estate Information Corp. Sales plunged 38% from 339 billion yuan in June (source BBG).
- The US government sent mixed messages on Thursday on where the latest trade agreement with China, including a possible extension of the pause on tariff hikes, is headed. Asked by a reporter at the regular press briefing whether an extension of the current pause on import tariffs aimed at each others’ products “was on the table”, White House press secretary Karoline Leavitt said, “I don’t think so, but I’ll let [Treasury Secretary Scott Bessent] speak on that, because he’s leading these negotiations.” (source SCMP)
- China and Hong Kong markets are down modestly at this stage, the CSI 300 off 0.25% to 4065, following a sharp fall yesterday. The SHI was last near 24728, off 0.20%. Headlines have crossed from China's NDRC, which has vowed to regulate disorderly competition in the economy. This has become a key focus point for policy makers. The NDRC also stated that the fourth tranche of support for consumers (via the trade in program), will be allocated in Oct. NDRC also stated it will provide support for jobs and domestic when needed (per BBG). Earlier, the S&P Mfg PMI fell more than expected and is now back in contraction territory.
- Yuan Reference Rate at 7.1496 Per USD; Estimate 7.2054
- Bonds have fought back with the 10YR CGB closing at 1.74% earlier in the week, only to rally back to 1.70% today.
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Historical bullets
GBPUSD TECHS: Fresh Cycle High
- RES 4: 1.3852 1.764 proj of the Feb 28 - Apr 3 - 7 price swing
- RES 3: 1.3835 High Oct 20 2021
- RES 2: 1.3800 Round number resistance
- RES 1: 1.3789 High Jul 01
- PRICE: 1.3741 @ 06:09 BST Jul 2
- SUP 1: 1.3632/3586 High Jun 13 / 20-day EMA
- SUP 2: 1.3439 50-day EMA
- SUP 3: 1.3338 Trendline support drawn from the Jan 13 low
- SUP 4: 1.3140 Low May 12 and key support
A bull cycle in GBPUSD remains in play and a fresh cycle high Tuesday reinforces bullish conditions. This maintains the price sequence of higher highs and higher lows. Note too that moving average studies are in a bull-mode position, highlighting a dominant medium-term uptrend. Sights are on 1.3800 next. Initial support to watch lies at 1.3586, the 20-day EMA. A break would signal scope for a corrective pullback.
AUSSIE BONDS: Cheaper, Narrow Ranges Ahead Of Key US Data
ACGBs (YM -4.0 & XM -2.5) are modestly weaker after trading in narrow ranges.
- Cash US tsys are little changed in today's Asia-Pac session after yesterday's twist-flattener. Wednesday's US data focus is on MBA Mortgage Applications at 0700ET, Challenger Jobs at 0730ET followed by ADP Employment Change at 0815ET. No Fed scheduled Fed speakers. Thursday is a heavy data day with NFP added due to Independence Day holiday closure on Friday.
- Cash ACGBs are 3bps cheaper with the AU-US 10-year yield differential at -11bps.
- Today’s Jun-35 auction showed solid pricing for ACGBs, with the weighted average yield coming in 0.45bps below prevailing mid-yields. However, the cover ratio nudged lower to 3.3625x. The AOFM plans to sell A$1000mn of the 2.25% 21 May 2028 bond on Friday.
- The bills strip has bear-flattened, with pricing -1 to -4.
- RBA-dated OIS pricing is slightly firmer across meetings today. A 25bp rate cut in July is given a 95% probability, with a cumulative 82bps of easing priced by year-end (based on an effective cash rate of 3.84%).
- Tomorrow, the local calendar will see Trade Balance and S&P Global Composite & Services PMIs.
BOBL TECHS: (U5) Support Is Intact For Now
- RES 4: 118.649 1.382 proj of the May 21 - Jun 3 - Jun 5 swing
- RES 3: 118.531 1.236 proj of the May 21 - Jun 3 - Jun 5 swing
- RES 2: 118.390 High Jun 13 and a bull trigger
- RES 1: 118.065 61.8% retracement of the Jun 13 - 16 downleg
- PRICE: 117.720 @ 05:48 BST Jul 2
- SUP 1: 117.530 Low Jun 5 and a key near-term support
- SUP 2: 117.470 Low May 21
- SUP 3: 117.470 Low May 21
- SUP 4: 116.660 Low Mar 27
Bobl futures are unchanged and continue to trade in a range. A bull cycle remains intact, however, the latest pullback has exposed key short-term support at 117.530, the Jun 5 low. Clearance of this level would highlight a stronger reversal and cancel the bull theme. This would open 117.470, the May 21 low. Key short-term resistance has been defined at 118.390, the Jun 13 high. A break of this price point would be a bullish development.
