JGBS: Futures Richer Overnight As US Tsys Extend Rally
In post-Tokyo trade, JGB futures closed stronger, +34 compared to settlement levels, after US tsys finished near session bests, gathering risk-off support as Fed Chair Powell discussed his outlook at the Chicago Economics Club.
- Chairman Powell warned that inflation may persist longer due to larger-than-expected tariffs, exacerbated by policy uncertainty.
- The belly of the US curve led the rally, with the US 5-year -8bps at 3.90%. The 2-year was -7.5bps to 3.77%, and the 10-year was -5.6bps at 4.28%.
- Earlier headlines crossed that Japan's Economic Revitalisation Minister Akazawa met with US President Trump ahead of key trade talks (per NHK via BBG).
- The focus will be on how quickly and what type of trade deal Japan can negotiate, particularly in terms of aiming to get lowered reciprocal tariff rates.
- Japan's PM Ishiba has stressed the risks to Japan's economic outlook from US tariffs, while BoJ Governor Ueda noted yesterday that the tariff outlook was trending towards the bad scenario the central bank had envisaged.
- Today, the local calendar will see Trade Balance and Weekly International Investment Flow data alongside a speech by BoJ Board Member Nakagawa.
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AUSSIE 10-YEAR TECHS: (H5) Reverses Off First Resistance
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.740/851 - High Mar 4 / High Dec 11
- PRICE: 95.580 @ 16:42 GMT Mar 17
- SUP 1: 95.420/95.300 - Low Feb 13 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.640 - 1.0% 10-dma envelope
Aussie 10-yr futures have faded sharply off the mid-week high, opening a small gap with first resistance. For bulls, a confirmed reversal and a breach of 95.851, the Dec 11 high, would instead reinstate a bull cycle and refocus attention on resistance at 96.207, a Fibonacci retracement point. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
CNH: USD/CNH Still Above 200-day MA Support, CNH Lags Higher Beta FX
USD/CNH tracks near 7.2290 in early Tuesday dealings, close to Monday intra-session lows near 7.2250. CNH gained 0.15% for Monday's session, slightly lagging broader USD index losses (the DXY lost 0.34%, the BBDXY down 0.26%). USD/CNH spot finished up at 7.2262. The CNY CFETS basket tracker, per BBG, was unchanged at 98.82.
- For USD/CNH technicals, we are close to the 200-day MA (near 7.2215). A clean break south is likely to see round figure support at 7.2000 targeted. In terms of topside resistance, we have the 200-day EMA at 7.2390, while all the other key EMAs are above 7.2500.
- CNH/JPY has rebounded back above 20.60, with recent lows just under 20.20. EUR/CNH remains elevated though, last above 7.89 and close to recent highs (7.9151). AUD/CNH is above 4.6150, testing 100-day EMA resistance. CNH has generally lagged the softer USD tone and better risk appetite of late.
- In the equity space, to recap onshore markets finished down slightly in terms for the CSI 300, but the Shanghai Composite edged higher. In US trade, the Golden Dragon index was up 4% though.
- Markets are digesting recent announcements around the PBoC mulling new tools to target key consumption sectors. Chinese authorities are also set to release plans for childcare subsidies, as well as increasing incomes of low-income rural populations, in a bid to boost consumption (see this link).
- US President Trump also stated China President Xi Jinping would visit the US soon (in remarks made Monday US time, see this BBG link).
AUSSIE 3-YEAR TECHS: (H5) Resistance Remains Exposed
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.730/932 - High Sep 17 / 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.360 - High Dec 11
- PRICE: 96.250 @ 16:41 GMT Mar 17
- SUP 1: 95.900 - Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures have pulled back from their most recent highs - a correction. A resumption of gains would signal scope for 96.360, the Dec 11 high. Clearance of this level would open 96.730, the Sep 17 ‘24 high. On the downside, a stronger reversal lower from current levels would signal a resumption of the downtrend. A deeper sell-off would refocus attention on 95.760, the 14 Nov ‘24 low.
