AUSSIE BONDS: Holding Richer On A Data-Light Day

US Equities fell on Friday unable to hold their gains on the poor labour data which will have implications for growth going forward. This morning US futures have opened higher in sympathy to the move in Asian stocks being led by the Nikkei in response to Ishiba stepping down, E-minis +0.20%, NQU5 +0.35%. The AUD continues to hold its gains in the crosses

• EUR/AUD - Overnight range 1.7815 - 1.7914, Asia is currently trading around 1.7860. The pair has drifted back towards its first support around the 1.7800 area, decent demand continues to be seen towards here first up, below there the next support is around 1.7600.
• GBP/AUD - Overnight range 2.0548 - 2.0635, Asia is trading around 2.0590. The pair found some solid demand around 2.0500 and bounced last week, expect sellers above 2.0700 initially. The wider range of 2.0400-2.1000 continues to contain.
• AUD/JPY - Overnight range 96.32 - 97.00, Asia is trading around 97.25. The pair looked to have topped out again after NFP, but this morning’s Ishiba news has thrown a spanner in the works. A sustained break above 97.50/98.00 is needed to reignite the upward trend. 
• AUD/NZD -  Overnight range 1.1115 - 1.1144, the cross is dealing in Asia around 1.1130. The Cross is consolidating above 1.1100, dips back towards 1.1000/1.1050 should be supported now.

Fig 1: AUD/JPY spot Daily Chart

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

Natural gas was higher on the week but finished on a soft note. Europe fell 1.1% to EUR 32.06 on Friday but was up 1.4% last week. It reached a high of EUR 32.75 before trending down to EUR 31.83. The region remains sensitive to fundamentals as the heating season approaches and it continues to rebuild inventories. With Russian strikes on Ukraine continuing, expectations of a near-term easing of sanctions have faded. 

• As of Saturday, European storage was 79.2% full.
• Bloomberg is reporting that a vessel carrying LNG from Russia’s restricted Arctic LNG 2 facility docked in China. This is the second report of China taking fuel from the sanctioned plant. Despite restrictions including on its shadow fleet, Russia continues to find ways around them. A punitive US tariff against India for its Russian energy purchases has not dissuaded it from continuing.
• US gas fell 1.6% to $3.026 on Friday but was still 1% higher last week. It reached a peak of $3.13 before trending lower as the immediate demand outlook looks soft given it is the shoulder season between summer and winter and output remains robust. It has started Monday higher at $3.08.
• The US weather outlook is mixed with the Northwest likely to see higher temperatures but the east below average around mid-September, according to Vaisala.
• US lower-48 gas production rose 5.5% y/y on Friday while demand fell 3.9% y/y (BNEF data). 

Last week's CFTC positioning update (for the week ending the 2nd of Sep) was notable on the leveraged side, where the skew was notably in favor of the USD, see the table below. JPY shorts were added to by 14.6k, while EUR and GBP net longs were cut back in the leveraged space. Indeed, for EUR, leveraged contracts are almost back to a net short position. AUD and CAD net selling by leveraged players was also evident, adding to existing shorts for both currencies. 

• These shifts came ahead of the NFP print on Friday, which was weaker than expected, but didn't do material damage to the USD. The BBDXY index dipped under 1200, but rebounded and is slightly firmer in early Monday dealings. USD/JPY gains will be welcomed by the leveraged players (post PM Ishiba stepping down) who extended shorts in yen last week.
• Still, it is difficult to see a meaningful USD rebound as US yield differentials weaken against major currency blocs.
• In the asset manager space, positioning shifts were more modest. GBP shorts were added to, but AUD shorts were cut, along with those for CAD. 

Table 1: CFTC Positioning Change & Outright Position By Major Currency 

Source: CFTC/Bloomberg Finance L.P/MNI