AUSSIE 3-YEAR TECHS: (H5) Corrective Bounce

USD/CNH saw lows of 7.3132 on Monday, as the Washington Post reported that the incoming Trump administration may water down its tariff plans. We rebounded from these levels, back above 7.3500, as Trump stated the report was fake news. In early Tuesday trade, USD/CNH tracks near 7.3470. CNH gained close to 0.20% for Monday's session. 

• Onshore spot finished up near 7.3280, with dips in this pair also supported. USD/CNY still finished slightly higher for Monday's session, despite the broader USD pull back (BBDXY index off over 0.60%). BBG notes state banks were reportedly USD sellers close to the 7.3300 level.   
• The CNY CFETS basket tracker edged down nearly 0.20% to 101.89, still close to recent cycle highs.
• For USD/CNH, intra-session lows from Monday were close to the 20-day EMA support point (near 7.3110). Recent highs just under 7.3700 remain intact.
• Cross asset headwinds persist for CNH. US-CH yield differentials remain elevated and continue to suggest dips in the pair will remain supported, given uncertainty over Fed cuts in 2025 and the prospect of further PBoC easing. Relative equity trends have also shifted in favor of offshore markets in the past week.
• Still, the PBoC sent a clearer and stronger signal on stabilising the yuan in its Q4 monetary policy meeting, emphasising “strengthening market management” whilst deleting “enhancing exchange rate flexibility” which appeared in its Q3 meeting, PBOC-run newspaper Financial News reported. Hence USD/CNY fixings may remain sub 7.2000 until we have firmer details on Trump's tariff plans.
• The local data calendar has Dec FX reserves on tap later today, but greater focus will rest on Thursday's inflation data. 

After rising strongly last week, oil prices were moderately lower on Monday driven by technical selling but held onto most of the gains. The relative strength index was flashing overbought after crude rose for five consecutive sessions. The USD index fell 0.6%.

• WTI is down 0.7% to $73.42/bbl following a high of $74.99, above initial resistance at $74.39, and then a low of $73.20. Key short-term resistance is at $76.41, while initial support is $71.79, January 2 low.
• Brent fell 0.4% to $76.17/bbl after rising to $77.50, above resistance at $76.89, and then falling to $75.94. If the uptrend resumes, then attention will refocus on key resistance at $79.50. Initial support is at $74.72.
• The US is planning more sanctions on tankers carrying Russian oil. The targeting of its shadow fleet has resulted in increased demand for Middle Eastern crude and subsequent pickup in prices. Saudi increased prices for Asian customers following Oman and Dubai.
• The latest CFTC data shows that hedge fund longs on WTI rose 41% over the last three weeks, while shorts fell 33% resulting in the largest net long position since August, according to Bloomberg.
• President Biden announced a ban on new offshore oil and gas projects covering around 625mn acres of coast. The area includes the Atlantic, Pacific and eastern Gulf of Mexico. President-elect Trump has said he will “unban” these areas but to do so will require an act of Congress.
• In Canada, Alberta’s government has said that it will guarantee barrels of crude to encourage new pipelines to be built to achieve its goal of doubling its oil and gas output. 

ACGBs (YM flat & XM -0.5) are slightly weaker after US tsys finished with a bear-steepener. US yields finished flat to 4bps higher across benchmarks. 

• US tsys and Wall Street were in rally mode into the open after a Washington Post report suggested President-elect Trump would go softer on tariff plans. But he quickly denied the report and the markets turned choppy in response.
• Cash ACGBs are flat with the AU-US 10-year yield differential at -16bps.
• Swap rates are flat.
• The bills strip is flat to -3 across contracts.
• RBA-dated OIS pricing is flat to 2bps firmer, with late 2025 leading. A 25bp rate cut is more than fully priced by April (109%), with a February cut at a 56% chance.
• Today, the local calendar will see Building Approvals ahead of November CPI data tomorrow.
• November CPI is likely to be watched closely ahead of Q4 data on January 29. It will also include more updates for services components than the October release. Bloomberg consensus is forecasting the headline to pick up 0.1pp to 2.2%. The trimmed mean was 3.5% the previous month.
• The local calendar also shows retail sales and trade balances on Thursday.
• AOFM Bond issuance is expected to resume in the week beginning 13 January 2025.