NZD: Lags Dollar Sell-Off, RBNZ In Focus Today
NZD/USD couldn't get above 0.5750 amid broad USD weakness overnight. The Kiwi is the second worst performer within the G10 space over the past 24 hours. On downside for NZD/USD, we found support ahead of 0.5680 yesterday, while beyond that is the 0.5600 region. All eyes today rest with the RBNZ decision, with a 50bps hike expected.
- The market may also be a little more nervous after yesterday's dovish surprise from the RBA about what the RBNZ will deliver. See our full preview here.
- NZ yield momentum is weaker against the US. The 2yr swap differential is down to around +12bps, versus recent highs closer to +30bps.
- This likely curbed NZD topside, even amongst a much better risk backdrop, with US equities +3% higher and the VIX sub 30%.
- Elsewhere, out earlier today, NZ house prices fell by 1.5% m/m in September according to core logic. The drop for Q3 was 4.1%, the largest since the 2008 GFC.
- NZ dairy prices were also weaker, with the GDT WMP falling by 4.29% to $3573 overnight.
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AUSSIE 10-YEAR TECHS: (U2) Outlook Deteriorating
- RES 3: 97.455 - High Mar 18
- RES 2: 97.185/275 - High Apr 5 / 200-dma
- RES 1: 97.040 - High Aug 03
- PRICE: 96.340 @ 16:07 BST Sep 2
- SUP 1: 96.245 - Low Sep 1
- SUP 2: 96.208 - 3.0% Lower Bollinger Band
- SUP 3: 95.663 - Low Jun 16
Aussie 10yr futures slipped further late last week and have dipped below key support at 96.355, Jul 22 low. This weakens the bull cycle posted since mid-June, opening the gap with the 200-dma on the continuation contract, at 97.275. The bull trigger is 97.040, the Aug 3 high. On the downside, recent weakness suggests scope for a deeper retracement towards the mid-Jun low of 95.663.
USDCAD TECHS: Key Resistance Remains Exposed
- RES 4: 1.3300 High Nov 4 2020
- RES 3: 1.3292 2.0% 10-dma envelope
- RES 2: 1.3224 High Jul 14 and key resistance
- RES 1: 1.3208 High Sep 1
- PRICE: 1.3084 @ 16:01 BST Sep 2
- SUP 1: 1.3063/1.2983 High Aug 23 / 20-day EMA
- SUP 2: 1.2895 Low Aug 25 and key near-term support
- SUP 3: 1.2828 Low Aug 17
- SUP 4: 1.2770 Low Aug 15
USDCAD rallied again Thursday, with the bull theme remaining in tact despite the Friday pullback. Attention is on 1.3224, a key resistance and the Jul 14 high. A break would represent an important bullish development. Note that moving average studies are in a bull mode set-up, highlighting a broader uptrend. Initial firm support is at 1.2895. A break would alter the picture. Initial support lies at .3063, the Aug 23 high and a recent breakout level.
US TSYS: Jobs, Orders Data Doesn't Preclude 75Bp Sep Hike, Fed Blackout in 1 Wk
Tsys trading moderately higher after the bell, near midmorning highs after a somewhat volatile first half, curves bull steepening (2s10s +5.363 at -20.069).
- Tsys whipsawed, extending session range to the down and upside in short order after August jobs gain of +315k - little better than +298k est while focus turned to avg hourly earnings, unemployment misses. Tsys extended highs after midmorning data missed est's: Factory Orders -1.0% vs. 0.2%, Durables -0.1% vs. 0.0% est.
- In-line with sporadic selling, BMO analysts summed up the in-line to mildly softer data saying "there is nothing in today's data that would bring into question Powell's ability to hike 75 bp on Sept 21 in the event the CPI release justifies such a move."
- Nevertheless, markets appeared to have taken data with a dovish tone as short end markets started to discount chances of 75bp hike at Sep 21 FOMC.(appr 60% vs. 75% on Thursday): Short end Eurodollar futures, lead quarterly EDU2 +0.0725 at 96.665 session high.
- Meanwhile, US markets closed Monday for extended holiday weekend, giving Fed speakers limited time to express their policy leaning ahead next media blackout next Friday at midnight.
- Currently, 2-Yr yield is down 10.2bps at 3.3976%, 5-Yr is down 9.8bps at 3.2996%, 10-Yr is down 5.8bps at 3.195%, and 30-Yr is down 1.7bps at 3.3444%
