HKD: Further Intervention To Defend Peg Band

TYU5 reopens at 110-06+, unchanged from closing levels in today’s Asia-Pac session.

• Overnight the US 10-year yield had a range of 4.4381% - 4.4798%, closing around 4.47%. 
• Treasury yields ended mixed overnight, the long-end ended a little lower helping the yield curve flatten (2s10s -2.07 at 44.758, 5s30s -1.58 at 84.005).
• MNI US DATA: Small Businesses Increasingly Planning To Raise Prices. Price components in today’s NFIB small business survey reinforce a view that May CPI – released tomorrow – might not see stronger tariff-driven inflation until the summer months. Whilst actual price changes held steady back close to their 2024 average, the breadth of planned price increases tilted higher again for the highest in just over a year even if it's still markedly lower than the surge in 2021/22. 
• MNI US DATA: Softer Redbook Retail Sales Notes Price-Conscious Shoppers Amid Tariffs. Johnson Redbook retail sales showed some signs of slowing in the first week of June, rising 4.7% Y/Y (week ending Jun 7), vs a targeted gain of 5.7%. A continued rise at the current pace would mark the softest month since January, and a continued deceleration from 6.7% in April (was 5.5% in May).
• The 10-year yield held its support around the 4.35% area last week. While this level holds focus will remain on potentially extending higher, CPI tonight will dictate direction.

The AUD had a range overnight of 0.6490 - 0.6533, Asia is opening around 0.6525. The AUD has managed to hold above 0.6500 as US stocks continue to press higher and the market positions itself for the US CPI tonight. 

• Officials are still working out technical details as US/China trade talks are expected to reconvene in London at 0800 PM (local time). "LUTNICK: CHINA TALKS WENT REALLY REALLY WELL .. TALKS COULD GO INTO TOMORROW IF NEED BE" Bbg.
• The AUD once again found decent demand back towards the 0.6500 area overnight as the market eyes a potential extension higher.
• Price remains in the 0.6350 - 0.6550 range, a sustained break above 0.6550 is needed for the move higher to accelerate. Price looks like it wants to test the top end of the range, tonight's US CPI print will have a say in that.
• Expect buyers to continue to be around on dips while the support in the AUD holds, a close back below 0.6350 is needed to challenge the newly formed uptrend. 
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6495(AUD400m), 0.6365(AUD550m). Upcoming Close Strikes : 0.6350(AUD 711m June 12), 0.6600(AUD643m June 12)

• CFTC Data shows Asset managers maintaining their shorts, the Leveraged community though continued to add to their shorts again.

  Fig 1: AUD/USD spot Hourly Chart

  

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

   

USD/CNH tracks near 7.1900 in early Wednesday dealings. CNH lost a little ground on Tuesday, but remains within recent ranges. Broader USD sentiment saw a small uptick in USD indices. USD/CNY ended up at 7.1878, while the CNY CFETS basket tracker edged down a little to 95.71, slightly above recent cycle lows. 

• Late in yesterday's Asia Pac session we saw China and Hong Kong equities weaken, which saw some negative spill over to CNH (Tuesday highs for USD/CNH were at 7.1943). The CSI 300 finished down 0.51%, while Hong Kong stocks moved up from lows but still finished down a touch.
• Concern over US-China trade talk progressions was cited for the weakness, but US officials continued to talk up positive progress from the talks as Tuesday's session unfolded (this helped push US stocks higher, while the Golden Dragon index rose 0.30% in US Tuesday trade).
• US Tsy Secretary Bessent stated "...he had to return to Washington in order to testify before Congress. US Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer planned to continue discussions with their Chinese counterparts “as needed,” Bessent said." (via BBG). We may see more details emerge later today, while Commerce Secretary Lutnick stated talks could continue into Wednesday if needed.
• Locally, we still await May aggregate finance/new loans data.
• For USD/CNH, the 20-day EMA is near 7.1980 in terms of topside resistance, but very narrow ranges continue to prevail. The 200-day EMA is close to 7.2410 on the topside, while recent lows were marked at 7.1645.