IDR: HSBC On IDR Flow Outlook

The BBDXY range overnight was 1209.64 - 1214.67, Asia is currently trading around 1213. Asia opens a little lower but the BBDXY continues to find demand back towards the pivotal 1200 area. The market will probably refrain from any big breaks until we see what the NFP on Friday night has to offer.

• The Kobeissi Letter on X - “Is the US Dollar overvalued? The US Fed Trade Weighted Real Broad Dollar Index is trading near its 40-year high."
• "The index measures the value of the Dollar against 26 currencies based on its competitiveness with trading partners."
• "The Inflation-Adjusted Broad Dollar Index is ~15% above its long-term average, suggesting the US Dollar is overvalued."
• "However, the US Dollar index has declined -9% year-to-date to its second-lowest level since April 2022."
• "This marks the 5th consecutive monthly decline, its worst streak in almost 5 years. The trade-based US Dollar is still expensive.” https://x.com/KobeissiLetter/status/1929650480352793038
• The BBDXY rejected the 1125 area pretty strongly, the USD should continue to be met with supply should this 1225/30 area cap price. 
• We are approaching some key Weekly support towards the 1200 area in the BBDXY and this has found some decent demand as we head into NFP on Friday. A break below here is needed to signal the move is about to accelerate.

• Data/Events : ADP, S&P Services PMI, ISM Services Index, Fed Beige Book

  Fig 1: Inflation Adjusted Dollar Index Monthly Chart

  

          Source: Kobeissi Letter/ Bloomberg

US stocks continue to find demand for now on dips, the S&P looks to be building for another test of 6000. The AUD has found some support overnight but the GDP print today has the potential to be weak. This could see the crosses once again underperform.

• EUR/AUD - Overnight range 1.7585 - 1.7708, Asia is trading around 1.7620. The pair broke above 1.7650 on Friday night but could not get any momentum to extend and failed towards 1.7700. Price action shows the market is bearish the AUD for now in the crosses. Support held again just below 1.7600 can the GDP give it the momentum to break 1.7650/1.7700.
• GBP/AUD - Overnight range 2.0898 - 2.0966, Asia is trading around 2.0940. Price consolidated overnight after moving higher in Asia. This pair needs to break back above 2.1000 to see another extension higher, after failing there Friday.
• AUD/JPY - Overnight range 92.06 - 93.14, Asia is trading around 92.95. Range looks 92.00 - 94.00 for now, a sustained break sub 91.50/92.00 will bring focus back to towards the lows again.

• AUD/NZD -  Overnight range 1.0752 - 1.0776, the cross is dealing in Asia around 1.0765. A top looks in place now just above 1.0900, the market will have been looking for a more dovish tone from the RBNZ last week and AUD/NZD could now see supply on bounces. The sell zone is back towards 1.0800/25 with the first target being around 1.0650.

  Fig 1: GBP/AUD spot Hourly Chart

  

  Source: MNI - Market News/Bloomberg

TYU5 is trading 110-16+, up 0-02 from its close

• The US 2-year yield opens around 3.947%, unchanged from its close.
• The US 10-year yield opens around 4.446%, down 0.1 from its close.
• Robin Brooks on X: What's going on with long US yields is worrying. These yields are up, but to see just how crazy their rise is, you must look at outlying parts of the yield curve. 10y10y forward Treasury yield (pink) is up 100 bps in the past year, almost as much as in the 2013 "taper tantrum..." https://x.com/martin_whetton/status/1929629089469714848
• Atlanta Fed President Bostic on Tuesday reiterated his view expressed in the March Dot Plot that he expects one rate cut later this year. Meanwhile, Fed Governor Lisa Cook said the U.S. economy faces heightened risks of both higher inflation and a weaker job market, and the current level of interest rates leaves the Federal Reserve in a good place to respond if either threat materializes.
• The 10-year yield continues to find good support around 4.35/40%. Yields need to hold above this area to continue to build for a move higher.

• Data/Events: ADP, S&P Services PMI, ISM Services Index, Fed Beige Book

  Fig 1: US Swap Rates

  

  Source: MNI - Market News/Bloomberg