KRW: USD/KRW Back Sub 1300 On Tech Rebound

1 month USD/KRW spent most of the post-Asia close drifting lower. After touching a high of 1259.6, we got to 1254 in NY trading, in line with USD weakness and better equity market sentiment. Note spot closed yesterday onshore at 1257.40. The 50-day MA is at 1248.23.

• Tech equity sentiment was better overnight, the SOX up 0.99%, while the MSCI IT index gained over 1%. Both indices remain within recent ranges though. The China Golden Dragon index continued to recover, up a further 3.33% and above the 100-day MA in a meaningful way for the first time since March 2021.
• Still, the Kospi struggled yesterday, down 1.66%, while offshore investors shed $244mn of local equities. Sentiment should be better today.
• Locally, the focus will be on a potential North Korea nuclear test. This would be the first such test since 2017. The US has stated its response to such a test will be forceful, although it is unlikely to get much support at the UN for a coordinated response in terms of new sanctions, given Russia and China's likely veto.
• On the data front, Q1 GDP has been revised down a touch to 0.6% QoQ (from 0.7%), while YoY growth is 3.0%, versus 3.1% initially reported.

• RES 3: 151.13 - High Mar 3
• RES 2: 150.44 - High Mar 14
• RES 1: 150.14/17 - High Apr 1 and key resistance / Intraday high
• PRICE: 149.68 @ 15:29 BST Jun 07
• SUP 1: 148.96/72 - Low May 10 / Low Mar 29 and the bear trigger
• SUP 2: 148.69 - 3.0% Lower Bollinger Band
• SUP 3: 148.16 - 1.0% 10-dma envelope

The primary downtrend in JGBs remains intact, with prices resuming their drift at the beginning of this week. Price is returning lower after rejecting a challenge of key resistance at 150.14, Apr 1 high. A clear break of this level would signal scope for a stronger corrective cycle and open 150.44, the Mar 14 high. Further downside would signal a resumption of bearish activity and open 148.96 and major support at 148.72.

Tuesday was a session of two halves for NZD/USD. Greenback strength weighed on the pair in Asia & Europe, despite a hawkish surprise provided by the RBA across the Tasman, who raised their cash rate target by 50bp. The rate faltered to $0.6423 (support from May 24 & 25 lows) but then recovered in NY hours as a slide in U.S. Tsy yields prompted initial USD strength to dissipate. This led to the formation of a dragonfly Doji candlestick.

• The kiwi's failure to appreciate on the back of RBA monetary policy decision may have been linked to AUD/NZD purchases after the announcement, which took the cross to four-year highs.
• ANZ Commodity Price Index fell 2.8% M/M in May, with dairy prices down 4.8% M/M. But GDT Price Index rose 1.5% at the latest auction, as per results published after NZ hours, snapping a losing streak lasting five auctions, even as whole milk powder prices edged 0.3% lower.
• FinMin Robertson noted that Labour has not set tax policies for 2023 election yet but there is scope for the tax system to be more progressive. He added that supply chain problems are expected to persist into next year and insisted that the budget did not exacerbate inflationary pressures.
• NZD/USD deals at $0.6486 at typing. The key near-term layer of support has been defined at $0.6423 and a break here would clear the way to May 18 low of $0.6291. Bulls look for a rebound above Jun 3 high of $0.6576, followed by the $0.6600 mark.