AUSSIE BONDS: Futures Are Softer But Above Sep Lows, RBA Seen Hiking Next Week

The NZD/USD had a range today of 0.5955-0.5980 in the Asia-Pac session; it is currently trading around 0.5955, -0.32%. The pair seems to be stalling toward the 0.6000 area again as it consolidates its recent gains. The US Dollar is back under pressure thanks to the move in Oil adding to the weight in US yields. The price action for the NZD continues to look constructive and I will be watching to see how the US Dollar continues to trade as a market caught short NZD looks to have potentially now begun to react. On the day, the first support again lies toward 0.5940-5950 which held overnight and then the 0.5885-0.5915 area. The pair looks to be building for a test of the 0.6000-0.6030 resistance. The 0.6000-0.6100 area has proved to be solid resistance for well over a year now though and I suspect it remains a big ask to convincingly break above here before Jackson Hole.

• “Oil fell as Iran and Oman discussed an “interim framework” to resume shipping through the Strait of Hormuz.” - BBG
• Options : Closest significant option expiries for NY cut, based on DTCC data:  0.5800(NZD613m). Upcoming Close Strikes : 0.5850(NZD300m Aug 27)- BBG
• The NZD/USD Average True Range for the last 10 Trading days: 36 Points

Fig 1: NZD/USD Spot Daily Chart

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

The USD/JPY range today has been 158.88-159.26 in the Asia-Pac session, it is currently trading around 158.95, -0.15%. The pair seems to be doing some real work between 158.00 and 160.00. US yields look to have topped out and are under pressure again, the drop in Oil is just adding to their weight. CFTC Data shows leveraged funds rebuilding Yen shorts, I suspect USD/JPY sellers could still be around back toward the 160-161 area while the USD trades with a heavy bias. The USD has broken below some pivotal support and should this initial response hold and momentum for the so-called “debasement trade” build. Then this could help keep this pair capped for now. Should the BOJ be able to sufficiently signal it is more comfortable with raising rates at a quicker pace it could also add to the Yen’s current gentle tailwinds that are trying to emerge. Lets see if this breakdown in the USD is able to build into something more substantial, while this plays out it looks like a wide and choppy 155-161 range.  

• "Australia’s Pension Giant Makes Its Biggest Yen Bet in Years: Australia’s second-largest pension has built its biggest overweight position in the Japanese yen in years, betting that markets are underpricing Bank of Japan interest rate hikes." - BBG https://blinks.bloomberg.com/news/stories/TKAY0QT9NJLS
• MNI - Japan PPI Services Rises More Than Forecast, Points To Firmer CPI Outlook: Japan's July PPI services was stronger than forecast. The PPI y/y outcome has consistently been above market expectations in 2026. The weaker yen, upstream price pressures from commodities have been drivers of broader inflation trends in 2026. The PPI outcome is continuing to point to firmer headline CPI risks as we progress into the early parts of H2. This should add, marginally, to BoJ confidence around the inflation outlook, albeit with services inflation in the CPI remaining only a little above 1%y/y.
• “Japan will set up a study group to explore implementing a 24-hour blockchain-based settlement system for stocks and government bonds, the Nikkei reported.” - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 159.00($936m), 160.00($621m), 161.00($844m). Upcoming Close Strikes : 155.00($1.26b Aug 28), 158.20($1.04b Aug 28), 159.00($1.25b Aug 31) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 72 Points

Fig 1 : USD/JPY Spot Daily Chart

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

The AUD/USD has had a range today of 0.7160-0.7186 in the Asia- Pac session, it is currently trading around 0.7183, +0.30%. The pair got a boost from higher than expected inflation data this morning, adding to the tailwinds from a particularly weak US Dollar. Reports we are yet again close to another “peace deal” in the Middle-East saw Oil extend its move lower in our session. This is adding to the headwinds for US yields causing them to remain heavy and challenge a market that is positioned short bonds. The US Dollar is back under pressure as a result, though it is not running away with US GDP/PCE tonight and Jackson Hole still to come. On the day, the first support remains back toward 0.7100-0.7130 and I suspect dips in the AUD could continue to be supported as the inflation data shows a hike is not yet off the table and the USD bears have ascendency going into Jackson Hole. Though until Jackson Hole is out the way expressing AUD outperformance in the crosses is probably the better way to go.

• MNI - Signs Of Cost Pass Through, Core Services Inflation Moderates: The RBA was worried about upside risks to inflation at its August meeting with the minutes showing a discussion over whether a pre-emptive hike was necessary. July trimmed mean inflation rose 0.5% m/m sa and held at 3.6% y/y, 0.1pp above consensus and well above the top of the RBA’s band. Its August forecast implies Q3 at 3.4-3.5%, which will be released 28 October.
• BBG summary of Deutsche forecast revision: "Trimmed mean inflation in July was intolerably high, Deutsche Bank’s Phil Odonaghoe says in a research note following CPI data released on Wednesday. Says “upside risks” have “crystallized” and now anticipates a quarter-point increase in the cash rate on Sept. 29. Risks are skewed to a delayed hike until November, but further policy tightening is needed, he says."
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.7060(AUD598m), 0.7100(AUD362m), 0.7160(AUD401m). Upcoming Close Strikes : 0.7000(AUD745m Aug 28), 0.7055(AUD1.35b Aug 27), 0.7100(AUD917m Aug 27) - BBG
• The AUD/USD Average True Range for the last 10 Trading days: 36 Points

Fig 2: AUD/USD spot Daily Chart

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