STIR: $-Bloc Pricing Little Changed Over Past Month, Except For NZ (2/2)

The overnight range was 1.7481 - 1.7552, Asia is trading around 1.7505. The pair extended its move lower as the AUD outperformance started to gain momentum thanks to a hawkish RBA. The AUD looks to be finding some real demand and dips for the currency have been shallow as the market starts to price in rate hikes next year. This has seen EUR/AUD move back towards the lower end of its range where I suspect we will challenge the support at some point. On the day sellers should reemerge back toward the 1.7555-1.7585 area looking for a move lower to challenge the pivotal 1.7450 support. A sustained break through this level and it could start to gather momentum potentially putting in a medium-term top.

• The EUR/AUD Average True Range(ATR) for the last 10 Trading days: 87 Points

Fig 1: EUR/AUD spot Weekly Chart

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

US gas was sharply lower on Tuesday as forecasts for higher temperatures later in December drove the unwinding of last week’s 10% gain. Henry Hub fell 6.8% to $4.579, which is still elevated. In contrast, European prices rose 1.9% to EUR 27.375 as inventory drawdowns continue. Prices are still down 5% this month after falling 8.6% in November and the fall is discouraging LNG shipments to Europe, which drove Tuesday’s increase in gas.

• US prices could rise sharply if there is another cold snap, especially if it impacts gas production and transportation. Storage levels have been declining towards their 5-year average.
• European gas trended higher over Tuesday reaching EUR 27.700 before easing. Not only are LNG imports lower but there have been disruptions to flows from Norway with both driving storage levels down which were 0.5pp lower on Monday at 71.8% and 10pp below the seasonal average.
• A mild start to the heating season has helped inventories, which started lower than in 2024, but some models are signalling that there could be a shift colder across northern Europe in the next week, according to Bloomberg.

The overnight range was 103.57 - 104.39, Asia is currently trading around 104.15. The pair accelerated higher overnight given a double whammy of a hawkish RBA and USD/JPY moving higher in reaction to the move in US yields. On the day dips should continue to be supported, the first buy zone is back toward the 103.50-70 area. The market is looking to test the 105.00 area initially where we could see some initial resistance, above here and it will turn its focus toward the decade long highs around 108.00-110.00.

• The AUD/JPY Average True Range(ATR) for the last 10 Trading days: 74 Points

Fig 1: AUD/JPY spot Weekly Chart

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