AUSTRALIA: Little Change In Labour Market Conditions Expected

The NZD had a range of 0.5831 - 0.5892 overnight, Asia opened 0.5870/75 just off the highs. The US dollar traded lower for a 5th straight session and the NZD has been a major beneficiary of that.

• The US is initiating probes on semiconductor and pharmaceutical imports targeting sector specific tariffs, adding yet more uncertainty to markets.
• RBNZ Conway says “ At this stage, the likely impacts on inflation in NZ are more ambiguous, but the balance of risks has shifted to the downside”. “We also noted that the committee has scope to lower the official Cash Rate further, as appropriate.” (via BBG)
• Technically the NZD held the pivotal 0.5500 area and is now looking like it is putting in a base from which to potentially move higher, see the chart below.
• The CFTC data shows both leverage funds and Asset managers are running historically large short positions. NZD is a favourite short in times of distress so these positions are being challenged. The data show Asset managers in particular have been active in reducing those shorts in recent weeks.
• The NZD has broken and closed above 0.5850, that's 4 consecutive days of new highs moving 400 points in that time from 0.5500 to 0.5900. 
• At this stage some consolidation might be healthy but the price action does suggest that dips will probably find demand, first support is 0.5800/25 then 0.5720/50.
• Data : Food Prices MoM, NZ Bill sale

Fig 1: NZD/USD Spot 

Source: MNI - Market News/Bloomberg 

• RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
• RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
• RES 1: 95.960 - High Apr 7 
• PRICE: 95.605 @ 15:40 GMT Apr 14
• SUP 1: 95.420/95.300 - Low Feb 13 / Low Jan 14  
• SUP 2: 95.275 - Low Nov 14  (cont) and a key support
• SUP 3: 94.640 - 1.0% 10-dma envelope

Aussie 10-yr futures extended a recent strong bounce through to the Friday close, putting prices through the top end of the recent range. The confirmed breach of 95.851, the Dec 11 high on the continuation contract, reinstates a bull cycle and focuses attention on resistance at 96.207, a Fibonacci retracement point. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.

US Tsy Secretary Scott Bessent made remarks from Argentina earlier (via BBG TV). He played down concerns over recent bond market volatility, stating there was no evidence of sovereign sales of USTs. He added that the Treasury has a big toolkit to deal with market turmoil but such a scenario is a long way off from being needed. See this BBG link for more details. 

• Among the headline highlights: "*BESSENT: NO EVIDENCE OF SOVEREIGN SALES OF US TREASURIES, *BESSENT: SAW INCREASED FOREIGN COMPETITION AT US DEBT AUCTIONS, *BESSENT: WE'RE A LONG WAY FROM 'BREAK THE GLASS' SITUATION, *BESSENT: TREASURY HAS BIG TOOLKIT, COULD BOOST BUYBACKS "
• "*BESSENT: DOLLAR IS STILL A GLOBAL RESERVE CURRENCY, *BESSENT: STILL HAVE A STRONG-DOLLAR POLICY"
• On trade talks: "*BESSENT: THERE WILL BE A FIRST-MOVER ADVANTAGE ON TRADE TALKS, *BESSENT: OTHERS WILL WANT PROTECTION AGAINST CHINA EXPORT FLOOD, *BESSENT: DOESN'T HAVE TO BE DECOUPLING WITH CHINA, BUT COULD BE"
• On Fed: "*BESSENT: AGREE ABOUT 6 MTHS BEFORE THINKING ON POWELL SUCCESSOR, "*BESSENT: AGREE ABOUT 6 MTHS BEFORE THINKING ON POWELL SUCCESSOR" BBG