AUSSIE BONDS: Holding Cheaper, Market Continues To Price Out RBA Cut

• CHINA AUG RATINGDOG MANUFACTURING PMI 50.5 VS 49.5 IN JULY

The BBDXY range overnight was 1200.04 - 1204.45, Asia is currently trading around 1202, +0.10%. The broad USD remained heavy on Friday night albeit still above its pivotal support. A sustained break below 1197/1195 is needed to regain the momentum lower and retest the year's lows. The USD is holding just above this support but continues to trade with a heavy tone.

• Daily Chartbook on X: “"One reason that the discussion of de-dollarization is a bit overdone is because of the structure of global financial markets and the overnight liquidity needs among the global systemically important banks as well as other financial intermediaries." - @joebrusuelas” 
• Bloomberg - “Dollar to Drop More as Fed Independence Threats Deepen. The dollar is bearing the brunt of investor skepticism and is already adjusting to political and structural headwinds regardless of what the Fed does next.”
• Robin Brooks on X: “Markets are pulling back on Dollar short positions. That's happening for commodity currencies like the Australian Dollar and Canadian Dollar, while Dollar shorts remain huge against the Euro and Yen. The Dollar short thesis is starting to crumble…”
• Samantha LaDuc on X: ”Yes tariffs are inflationary - so too is a US dollar depreciation - that results in a coming “inflation mountain.”

Fig 1: BBDXY 2H Chart

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

US Equities ended the week poorly after earlier shrugging off multiple headwinds, a combination of the PCE print & month-end flows the likely culprits. US Futures have opened higher this morning, E-minis +0.20%, NQU5 +0.30%. The AUD found some demand towards the end of last week and is consolidating those recent gains.

• EUR/AUD - Overnight range 1.7835 - 1.7894, Asia is currently trading around 1.7880. The area just above 1.8100 has seen decent supply cap it the last few months, a sustained move above 1.8100 is needed to see the move extend higher. The pair has drifted back towards its first support around the 1.7800 area, expect some demand here first up, below there next support is around 1.7600.
• GBP/AUD - Overnight range 2.0599 - 2.0662, Asia is trading around 2.0660. The pair is probing just below the 2.0700 pivot within its wider 2.0450-2.1050 range where you could expect some demand first up. If this level can’t hold the focus will turn back to the range lows towards 2.0450.
• AUD/JPY - Overnight range 96.01 - 96.22, Asia is trading around 96.35. The pair is probing above the 96.00 area this morning. A sustained move back above 96.50 would turn the trend higher again but until then sellers should be around looking for this move to top out.
• AUD/NZD -  Overnight range 1.1095 - 1.1119, the cross is dealing in Asia around 1.1085. Momentum higher looks to have stalled above 1.1100 for now, look for demand to return on a dip back towards the 1.1000 area.

Fig 1: AUD/JPY spot 2H Chart

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