EM ASIA CREDIT: LG Chem: State support in question

US stocks are consolidating near their new all-time highs. This morning has seen US futures open slightly higher, ESU5 +0.12%, NQU5 +0.18%. The risk back drop still looks pretty good and this election outcome only adds to the headwinds for JPY longs, was this morning's reaction simply a “buy the rumour sell the fact” ?

• EUR/JPY - Friday night range 172.73 - 173.11, Asia is trading around 172.50. This pair has had a decent move higher and has led the charge against the JPY longs. Short-term it is starting to look a little stretched but the direction is clear and should expect demand on dips. First support 170.50 area then the more important 168.50 area.
• GBP/JPY - Friday night 199.47 - 199.97, Asia trades around 199.10. The pair continues to find good demand towards its support around 198.00 though momentum higher has stalled for now. 
• NZD/JPY - Friday night range 87.49 - 88.81, Asia is currently dealing 88.20. The pair has also seen upward momentum stall this morning. The Support towards 87.00 needs to hold for the focus to remain on the 90.00/91.00 area.
• CNH/JPY - Friday night range 20.6515 - 20.7301 Asia is currently trading around 20.6800. This pair has pulled back from its highs but the pair still looks like it could continue to press higher. Look for demand now back towards the 2.40/50 area.

Fig 1 : CNH/JPY Hourly Chart

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

ACGBs (YM +0.5 & XM +0.5) are little changed after trading in narrow ranges on a local data-light session.

• Cash US tsys are closed in today’s Asia-Pac session with Japan out for the Marine Day holiday. TYU5 trades slightly higher at 110-27+.
• Cash ACGBs are little changed with the AU-US 10-year yield differential at -7bps.
• The bills strip is slightly weaker, with pricing -1 to -2.
• RBA-dated OIS pricing is 3-13bps softer across meetings versus Thursday’s pre-employment data levels. A 25bp rate cut in August is given a 98% probability, with a cumulative 66bps of easing priced by year-end (based on an effective cash rate of 3.84%).
• Today, the local calendar will be empty, ahead of the RBA Minutes for the July Meeting tomorrow.
• A new 21 October 2036 Treasury Bond is planned to be issued via syndication this week (subject to market conditions).

The BBDXY range overnight was 1202.46 - 1207.37, Asia is currently trading around 1205. There were no signs of Powell being fired over the weekend and the USD sighs a breath of relief. Though President Trump's response to a WSJ article alluding to the fact it was Scott Bessent who laid out the case for why he should not oust Powell would leave the market feeling just as uneasy. It is starting to feel that without the headwinds from the rumours surrounding a Powell sacking, the USD could well have started some sort of a reversion back to the mean.

• Donald J Trump on Truth Social: “Nobody had to explain that to me. I know better than anybody what’s good for the market, and what's good for the U.S.A. If it weren’t for me, the market wouldn’t be at record highs right now, it would probably have crashed! So get your information correct. People don’t explain to me, I explain to them!”
• Robin Brooks on X: “The Dollar has now been essentially unchanged for 3 months. Nothing changes market narratives like price action (or lack of price action). Gone is all the talk about reserve currency status and sentiment has shifted to neutral from very negative just a few months ago...”
• 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.
• Data/Events : Leading Index

Fig 1: BBDXY Hourly Chart

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