AUSSIE BONDS: Futures Softer, But Up From Lows, Yields Tracking Recent Ranges

The Asia-Pac USD/JPY range has been 147.43 - 147.79, Asia is currently trading around 147.45, -0.20%. USD/JPY is consolidating within a 146.50-148.00 range. Price has moved very quickly away from the pivotal 151/152 area much to the relief of Institutional Yen longs and the BOJ. Price is holding above the support area between 146.00/147.00, a move sub 145.00 is needed to turn momentum lower once more, until then the 145.00-151-00 range should dominate. US CPI tomorrow night will be an important input.

• MNI JAPAN: Ishiba Maintains Intention To Remain PM As LDP Critics Threaten Recall. The governing Liberal Democratic Party (LDP) has concluded a two-hour meeting of lawmakers from both houses of the National Diet. The formal reason for the assembly was to assess the fallout from the 20 July House of Councillors election, in which the LDP-Komeito governing coalition lost its majority in the upper chamber. However, the meeting was also a chance for LDP lawmakers to voice their displeasure with PM Shigeru Ishiba, whose critics blame for the party's poor performance.
• (Bloomberg) -- “Data on Japanese bond buying show a “deliberate realignment of Japanese portfolio investment away from US sovereign debt and toward the sovereign markets of the eurozone,” according to strategists at Mizuho.”
• “Carry traders are piling into high-yielding EM currencies as wagers on Fed rate cuts weaken the dollar.” - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 147.00($470m).Upcoming Close Strikes : 150.25($1.47b Aug 13) - BBG.
• CFTC data shows asset managers reduced their JPY longs +60532( Last +75119), leveraged funds slightly reduced their newly built short JPY position -29308(Last -31280).

Fig 1 : JPY CFTC Data

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

The AUD/USD has had a range of 0.6514 - 0.6528 in the Asia- Pac session, it is currently trading around 0.6525, +0.05%. A very quiet start to the week saw AUD/USD consolidate above 0.6500. Risk has traded a little higher in our session, E-minis +15%, NQU5 +0.15%. 

• (Bloomberg) - “Reports that AMD and Nvidia will pay 15% of their China revenue to the US government should be a negative for those companies and for tech more broadly. Investors may shrug off the news or even welcome it in the short term as a sign that the companies can go on selling chips to China, but the longer-term outlook is that profit margins may narrow.”
• MNI -  The RBA decision is on Tuesday August 12 and is widely expected to cut rates 25bp to 3.60% given the further moderation in underlying inflation in Q2 and signs that the labour market has reached a turning point and is weakening. It had 50bp of easing for H2 assumed in its May projections. There will be an update to the RBA outlook provided with the decision but it is likely to be consistent with the Board's cautious approach to easing.
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.6565(AUD783m Aug 12), 0.6600(AUD1.25b Aug 14) - BBG
• CFTC Data shows Asset managers added to their shorts -60729(Last -49183), the Leveraged community added very slightly to their own shorts -13997(Last -13823).
• AUD/JPY - Asia-Pac range 96.18 - 96.38, Asia is trading around 96.20. The pair has bounced to test its first resistance around the 96.50 area. There should be sellers around here initially, a sustained break below 94.50/95.00 is needed to signal a deeper move lower or a break above 97.50 would reinstate the momentum higher.

Fig 1: AUD CFTC Data

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

The TYU5 range has been 111-25+ to 111-29+ during the Asia-Pacific session. It last changed hands at 111-29, up 0-02+ from the previous close. 

• The 10-year yield had a powerful move lower in reaction to the NFP data, breaking below its 4.30% pivot within the wider range 4.10% - 4.65%. This now turns momentum lower in yields and you could expect buyers of treasuries on bounces back towards 4.30/35% now looking to initially test the 4.10% area. 
• Bob Elliott on X: “Used car prices have been a big negative on CPI for the last 3m. A notable difference from the broad trend of underlying used car prices going from a significant disinflationary pressure to a modestly inflationary one over the last year or so.”

• MNI DATA - Tuesday’s CPI report headlines the US economic calendar with analysts expecting core CPI inflation to gain momentum in July as the acceleration in core goods inflation continues. We’re starting to get into larger tariff impacts on core goods but the largest could be reserved for Aug-Sep by some estimates. We are currently tracking unrounded core CPI estimates at around 0.32% M/M after the 0.23% in June at what would be the strongest M/M print since January.

  Fig 1: 10-Year US Yield 2H Chart

  

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