GOLD: Gold Set for Weekly Drop

The AUD/USD has had a range of 0.6417 - 0.6452 in the Asia- Pac session, it is currently trading around 0.6445. The USD has come under pressure straight from the opening this morning and has remained heavy across the board all through our session. If you want to express a short in the AUD the crosses look a better way to do it.

• Bloomberg - “Australia’s hefty A$1.2b sale of December 2035 debt went off with decent demand metrics. That underscores that the concerns swirling around Japanese and US government bonds at the longer end don’t really resonate for the South Pacific economy given its cleaner fiscal fundamentals.”
• MNI - Expectations of sustained strong pricing at auctions proved accurate, with the latest round of ACGB Dec-35 supply seeing the weighted average yield print 0.55bp through prevailing mids (per Yieldbroker).
• The AUD/USD has seen a decent bounce today, price action against the USD is pretty impressive considering what was thrown at it yesterday. First target looks to be the highs just above 0.6500, a sustained break above here would signal the potential for a larger move higher.
• Expect buyers to be around on dips while the support in the AUD holds, a close back below 0.6300/50 is needed to negate the newly formed uptrend.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6380(AUD300m), Upcoming Strikes : 0.6375(AUD483.6m May 23), 0.6550(AUD480.3m May 23)

• AUD/JPY - Today's range 92.56 - 92.90, it is trading currently around 92.65. Decent demand seen towards the 92.50 area where it holds again in our session. A sustained close back below 91.50/92.00 is needed to turn the focus back towards the lows again.

  Fig 1: AUD/USD spot Daily Chart

  

  Source: MNI - Market News/Bloomberg

RBA-dated OIS pricing is flat to slightly softer across meetings today as the market continues to digest yesterday’s dovish tilt from the RBA. 

• RBA-dated OIS pricing is now 8-20bps softer than yesterday’s pre-RBA levels.
• A 25bp rate cut in July is given a 68% probability, with a cumulative 70bps of easing priced by year-end.

Figure 1: RBA-Dated OIS – Current Vs. Pre-RBA Level

Source: MNI - Market News / Bloomberg

TYM5 has traded higher within a range of 110-00 to 110-10+ during the Asia-Pacific session. It last changed hands at 110-0, down 0-06 from the previous close.

• The US 2-year yield has edged higher, dealing around 3.977%, up 0.01 from its close.
• The US 10-year yield has extended higher, dealing around 4.507%, up 0.02 from its close.
• “Donald Trump is losing patience with demands to raise a draft SALT cap past $30,000, a person familiar said. But some House Republicans still plan to oppose the bill unless their changes are made.”(BBG)
• “There is a clear narrative building on Wednesday in Asia as long-end bond futures extend losses, which is helping to undermine US equity contracts. While it isn’t yet a full repeat of the “Sell America” theme, there is broad weakness developing for the greenback.”(BBG)
• The 10-year found sellers again back towards 4.40% overnight. Asia is having another look back above 4.50% in our session, a sustained break above 4.55/60% needed to see another round of selling targeting the 4.75% area. Support seen back towards 4.35/40%, dips back towards here should see supply emerge once more.
• Data/Events : MBA Mortgage applications, Richmond Fed President Tom Barkin , Fed Governor Michelle Bowman to participate in a “Fed Listens” event