AUSSIE BONDS: Forthcoming ACGB Transactions

The EUR/USD range overnight was 1.1529-1.1578, Asia is currently trading around 1.1545. The pair has broken the support seen just below the 1.1600 area as the USD breaks its trend lower. The market continues to be more comfortable selling US dollars, but this break lower in the Euro will not be sitting comfortably with them for the moment. The USD continues to trade well supported as risk remains under pressure from the escalation in the Middle-east, while this continues to play out it should keep the headwinds for the EUR in place. On the day, the first resistance remains back toward the 1.1570-1.1600 area, while the price holds below 1.1650-1.1700 I would be skewed toward another test of the 1.1400-1.1500 support area. Though with what looks to be quite a lot of optionality around here not sure how likely it is to give way.

• Bloomberg - “Germany will undertake a strategic effort to become a global leader in aviation over the next 15 years, with focused investment in military aircraft manufacturing, sustainable fuels and top technology.” https://x.com/business/status/2064378259773509707?s=20
• Options : Closest significant option expiries for NY cut, based on DTCC data: 1.1430(EU930m), 1.1700(EU920m). Upcoming Close Strikes :  1.1500(EU2.76b June 12), 1.1500(EU4.1b June 15) - BBG
• The EUR/USD Average True Range for the last 10 Trading days: 53 Points

Fig 1 : EUR/USD Spot Daily Chart

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

Yesterday saw fairly strong outflow momentum for the region, with selling flows resuming in terms of South Korean markets. This also looks to be continuing today, per BBG's NBUY function, with around $1.5bn in further net selling, once again concentrated in the electronics sector. The Kospi is down today, around 3.4% weaker, as the index struggles to re-capture the 8000 handle. Broader tech equity market trends remain volatile but with a downside bias. Such a backdrop is also weighing on Taiwan flows, with net outflows from this market larger than South Korea in the past 5 trading days. The Taiwan central bank chief noted earlier that they are monitoring flows to the stock market, but noted the recent pullback in the market is healthy.  

• Elsewhere outflow pressures, with Indonesia seeing a consistent run of such pressures. We haven't seen an acceleration though, even as the local stock index hit fresh multi year lows.
• Local assets are recovering some ground after yesterday's intra-meeting BI rate hike. BI is also reportedly talking to investors from around the world to explain its actions. Focus will be on whether we see foreign investors inflows return to local stocks. 

Table 1: Asian Markets Net Equity Flows 

Source: Bloomberg Finance L.P./MNI 

*JAPAN 30Y GOVT BOND AUCTION MAY HAVE 97.65 LOWEST PRICE:POLL - BLOOMBERG