US TSYS: Curve Marginally Flatter In Asia
TYZ3 deals at 107-07+, +0-12, a 0-09 range has been observed on volume of ~166k.
- Cash tsys sit 1bp cheaper to 3bps richer across the major benchmarks, the curve has twist flattened pivoting on 5s.
- Tsys extended their post-FOMC bid in early Asian dealing as local participants digested the FOMC rate hold and Chairman Powell's remarks, this was seen alongside pressure on the USD and a bid in US Equity futures.
- The short end was pressured through the session erasing early gains, perhaps the rise in Oil prices weighed. WTI was up ~1%.
- FOMC dated OIS now price a terminal rate of 5.40% in January with ~70bps of cuts by September 2024.
- The latest monetary policy decision from the Bank of England headlines in Europe, further out we have US factory orders, initial jobless claims and productivity.
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EURUSD TECHS: Bear Trend Extension
- RES 4: 1.0761 50-day EMA
- RES 3: 1.0737 High Sep 20
- RES 2: 1.0674 High Sep 21
- RES 1: 1.0647 20-day EMA
- PRICE: 1.0465 @ 05:45 BST Oct 3
- SUP 1: 1.0460 Intraday low
- SUP 2: 1.0406 50.0% retracement of the Sep ‘22 - Jul ‘23 bull leg
- SUP 3: 1.0382 2.0% 10-dma envelope
- SUP 4: 1.0291 Low Nov 30 2022
EURUSD has traded to a fresh trend low, confirming a resumption of the downtrend. The move lower maintains the price sequence of lower lows and lower highs and note that moving average studies are in a bear mode position. The break lower signals scope for a move towards 1.0406 next, a Fibonacci retracement point. Initial firm resistance is at 1.0647, the 20-day EMA. A break would signal the start of a correction.
BUND TECHS: (Z3) Trend Condition Remains Bearish
- RES 4: 130.19 High Sep 22 and key resistance
- RES 3: 129.50 20-day EMA
- RES 2: 129.23 High Sep 27
- RES 1: 128.79 High Sep 29
- PRICE: 127.80 @ 05:22 BST Oct 3
- SUP 1: 127.01 Low Sep 28 and the bear trigger
- SUP 2: 126.54 1.764 proj of the Jul 19 - Aug 4 - Aug 8 price swing
- SUP 3: 126.00 Round number support
- SUP 4: 125.69 2.00 proj of the Jul 19 - Aug 4 - Aug 8 price swing
Bund futures remain in a downtrend. The contract traded sharply lower last week before finding some support on Friday. Gains are considered corrective. The recent breach of support at 129.72, Aug 14 low and a key bear trigger, reinforced a bearish theme and confirmed a resumption of the primary downtrend. Sights are on 126.54 next, a Fibonacci projection. Key short-term resistance is at 130.19, the Sep 22 high.
AUSSIE BONDS: Cheaper But Slightly Richer After The RBA Decision
ACGBs (YM -2.0 & XM -6.5) sit slightly stronger after the RBA leaves the cash rate target at 4.10%, for the fourth consecutive meeting. This was Michele Bullock’s first meeting as Governor. The statement was little changed, which says something in itself - for now it is business as usual at the Reserve Bank. By choosing the Deputy Governor to replace Philip Lowe continuity appears to have been preserved. The Board retained its tightening bias and so has kept its options open for the November 7 decision given updated forecasts and Q3 CPI due on October 25.
- Cash ACGBs are 2-3bps richer after the RBA decision to be 1-6bps cheaper on the day. The 3/10 curve is steeper, with the AU-US 10-year yield differential at -13bps.
- The swaps curve has twist-steepened, with rates 2bps lower to 3bps higher.
- The bills strip has twist-steepened, with pricing +3 to -4. Ahead of the RBA, the strip had bear-steepened.
- RBA-dated OIS pricing is little changed after the RBA decision. The market had only attached a 12% chance of a 25bp hike today. Terminal rate expectations sit at 4.38%, the highest since late July.
- Tomorrow the local calendar sees Judo Bank PMIs (Final) released.
- Tomorrow the AOFM plans to sell A$800mn of the 2.75% 21 June 2035 bond.
