EM LATAM CREDIT: MercadoLibre: New 7 & 10-Year Notes Fair Value

The AUD/USD had a range Friday night of 0.6533-0.6553, Asia is trading around 0.6545. US yields retraced on Friday night but the USD continues to grind higher challenging levels last seen in July/August. The AUD/USD is back within its recent 0.6400-0.6650 range with the pivot being around 0.6500-0.6550 where I would expect some demand first up, RBA tomorrow but the market is not expecting them to move.

• MNI Policy: RBA Board To Hold, Push Out Midpoint Return. The Reserve Bank of Australia Board is expected to keep the cash rate at 3.6% next Tuesday following stronger-than-expected Q3 inflation and is likely to push back the anticipated return of inflation to the midpoint in updated forecasts released alongside the decision.
• Bloomberg reports Australian home prices climbed at the fastest pace in more than two years in October, underscoring how a resurgent property market threatens to complicate the RBA’s efforts to cool inflation in this week’s rate decision.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6600(AUD 338m). Upcoming Close Strikes : 0.6625(AUD944m Nov 4), 0.6300(AUD600m Nov 4) - BBG
• Data/Event: Melbourne Institute Inflation, ANZ-Indeed Job Advertisements, Building Approvals, Household Spending 

Fig 1: AUD/USD spot Daily Chart

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

The key event in NZ this week is the Q3 labour market and wages data released on Wednesday. Filled jobs for the quarter signal a stabilization but employment is likely to have remained weak with consensus forecasting it to rise only 0.1% q/q to be still down 0.2% y/y. The unemployment rate is expected to rise 0.1pp to 5.3%, in line with the RBNZ’s August projections. Soft labour demand is likely to weigh on private wage growth which is forecast to rise around 0.4% q/q after 0.6%.

• The RBNZ’s biannual financial stability report is also published on Wednesday. It is likely to be concerning if it shows an increase in mortgage arrears despite recent easing.
• In terms of housing data, October Cotality home values and September building permits are released Monday. The construction sector has lagged the rest of the economy but the ANZ business survey is showing some recovery.
• October ANZ commodity prices are released on Wednesday. They fell 1.1% m/m in September.

• RES 3: 95.982 - 76.4% retracement Sep’24 - Nov’24 downleg
• RES 2: 95.960 - High Apr 7 (cont.)
• RES 1: 95.900 - High Oct 17
• PRICE: 95.670 @ 16:16 GMT Oct 31
• SUP 1: 95.510 - Low Sep 3  
• SUP 2: 95.415/95.300 - Low May 15 / Low Jan 14 
• SUP 3: 95.275 - Low Nov 14  (cont) and a key support

Aussie 10-yr futures slipped lower Wednesday on the back of hotter-than-expected Australian inflation. This returned prices lower despite nascent signs of a technical recovery as recently as last week. The sustainability of the pullback will be dependent on prices holding above key short-term support at 95.510, the Sep 3 low. Near-term resistance remains 95.780, the Sep 12 high. A clear break of this level signals scope for a continuation higher and opens 95.960, the 76.4% retracement level for the Sep’24 - Nov’24 downleg.