EM ASIA CREDIT: Korea Housing Finance: New $ deal

• CHINA SETS YUAN CENTRAL PARITY AT 7.1405 MON VS 7.1382

The BBDXY range overnight was 1202.95 - 12005.36, Asia is currently trading around 1204. The USD traded sideways for most of the Friday N/Y Session. The market is very quick to pounce onto anything that potentially justifies selling the USD but the US CPI out tomorrow night could potentially add some headwinds to this trade in the short-term. I suspect we see some paring back of USD shorts going into this print and then trade the reaction. A sustained break back below 1198 points to a retest of the lows, and a bounce back towards 1220/1230 should probably be faded initially.

• (Bloomberg) -- Weakening US jobs data has undermined the Federal Reserve’s view that the US labor market is solid, according to ING Groep NV strategists, who predict three back-to-back quarter-point interest-rate cuts starting from next month. The team sees EUR/USD rallying to 1.20 (spot: 1.165) and USD/JPY falling to 140 (spot: 147.85) over the next three months. “Sticky US inflation might lead to brief, corrective dollar rallies, but these should be the exception,” they say “Lower short-dated US rates are going to cut hedging costs and make it cheaper for the buy-side to raise hedge ratios on US assets”
• Robin Brooks on X: “Everyone talks about how Trump is the reason for the Dollar fall, but the truth is more mundane: markets price much bigger rate cuts for the Fed than other central banks. Those cuts are predicated on inflation staying low, which is about to get tested...”
• There is a broad consensus that the USD is set to embark on a decent move lower as the world reduces its exposure to the US and repatriates a lot of these flows. This consensus will also result in some decent short squeezes as a lot of the market is positioned the same way.

Fig 1: BBDXY 2H Chart

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

US Equities were bid for the majority of the N/Y session, closing within a whisker of all-time highs. This morning US futures are trading slightly higher, ESU5 +0.14%, NQU5 +0.09%. The AUD is trading mixed to sideways in the crosses as the market awaits a clearer direction from global risk, GBP/AUD the only real standout having bounced off its support last week.

• EUR/AUD - Overnight range 1.7827 - 1.7879, Asia is currently trading around 1.7865. The pair is trading sideways with very little direction. The direction US stocks ultimately decide on following will have a direct impact on the direction of this pair. It is currently comfortable in a 1.7650/1.8050 range.
• GBP/AUD - Overnight range 2.0568 - 2.0631, Asia is trading around 2.0625. The pair continues to find good demand towards the lower end of its 2.0400 - 2.1050 range; it saw a good bounce off this support last week, sellers should remerge back towards the 2.07/08 area initially.
• AUD/JPY - Overnight range 96.06 - 96.52, Asia is trading around 96.25. The pair has bounced to test its first resistance around the 96.50 area. There should be sellers around here initially, a sustained break below 94.50/95.00 is needed to signal a deeper move lower or a break above 97.50 would reinstate the momentum higher.
• AUD/NZD -  Overnight range 1.0941 - 1.0966, the cross is dealing in Asia around 1.0960. The Cross continues to trade sideways after stalling towards the 1.1000 area once more. The range looks to be 1.0850-1.1000 for now.

Fig 1: GBP/AUD spot 2H Chart

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