PRECIOUS METALS: Gold & Silver Range Trade Despite Lower USD & Weak ADP

• RES 3: 95.982 - 76.4% retracement Sep’24 - Nov’24 downleg
• RES 2: 95.960 - High Apr 7 (cont.)
• RES 1: 95.900 - High Oct 17
• PRICE: 95.640 @ 16:08 GMT Nov 3
• SUP 1: 95.510 - Low Sep 3  
• SUP 2: 95.415/95.300 - Low May 15 / Low Jan 14 
• SUP 3: 95.275 - Low Nov 14  (cont) and a key support

Aussie 10-yr futures slipped lower Wednesday on the back of hotter-than-expected Australian inflation. This returned prices lower despite nascent signs of a technical recovery as recently as last week. The sustainability of the pullback will be dependent on prices holding above key short-term support at 95.510, the Sep 3 low. Near-term resistance remains 95.780, the Sep 12 high. A clear break of this level signals scope for a continuation higher and opens 95.960, the 76.4% retracement level for the Sep’24 - Nov’24 downleg. 

• RES 3: 97.796 - 1.618 proj of the Sep 3 - 12 - 15 price swing
• RES 2: 96.780 - High Jun 26 (cont)
• RES 1: 96.700 - High Sep 12  
• PRICE: 96.345 @ 16:07 GMT Nov 3
• SUP 1: 96.280 - Low May 15 (cont.)  
• SUP 2: 95.900 - Low Jan 14 (cont.)
• SUP 3: 95.760 - Low 14 Nov ‘24

Having bounced well on the back of the mild US CPI print, Aussie 3-yr futures reversed course Wednesday on strong domestic inflation data containing RBA cut pricing through 2026. This keeps prices well below prior resistance at 96.615, the Sep 12 high, and refocuses attention on 96.280 as the next major support. 

ACGBs (YM x-1.5 & XM -1.5) are weaker after cash US tsys finish moderately weaker.

• Today is RBA Policy Decision day, with the Board likely to remain highly data-dependent and cautious given inflation's renewed shift higher and the emerging domestic recovery, but easing labour market conditions. (see MNI RBA Preview here)
• Paul Bloxham (HSBC) argues that Australia’s labour market still appears tight, as inflation is rising even with unemployment at 4.3%. He questions whether the RBA may have already eased policy too much. Consequently, he does not expect further rate cuts and believes the next move in interest rates is more likely to be an increase. – AFR via BBG
• These thoughts appear consistent with the attached chart, which highlights that rising annual inflation tends to end easing cycles.
• Cash ACGBs are 1bp cheaper.
• The bills strip is flat to -2 across contracts.
• RBA-dated OIS pricing implies almost no chance of an easing, with just a 3% probability assigned. As it currently stands, the OIS market has only an 80% chance of a 25bp cut by mid-2026.
• The AOFM plans to sell A$1200mn of the 4.25% 21 March 2036 bond on Wednesday and A$800mn of the 3.00% 21 November 2033 bond on Friday.

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