ASIA FX: Mixed Trends In NEA, USD/KRW Rebounds, USD/TWD Dips Towards 30.00
In North East Asia FX, trends have been mixed. USD/CNH couldn't sustain an earlier dip, while USD/KRW has rebounded after strong won gains on Wednesday. USD/TWD is lower.
- USD/CNH saw a brief dip under 7.1950 not long after the USD/CNY fixing, which was a fresh low back to early Apr of this year. However, we steadily climbed from there and are back above the 7.2030 level now. CNH's beta with respect to USD moves remains low, particularly in terms of fresh USD downside. This is leaving CNH underperforming on key crosses. CNH/JPY is back under 19.90.
- Spot USD/KRW has rebounded, following Wednesday's strong won gains, which reflected reports that US-South Korea officials are discussing FX markets, with US officials reportedly stating that the weaker won trend is driving the country's trade surplus. From the low 1370 region, USD/KRW now sits back above 1380, around 0.65% weaker in won terms. Today's move higher in the pair feels like a consolidation though after Wednesday's sharp dip. Sellers might emerge between current levels and 1390.
- USD/TWD has fallen close to 30.00, but hasn't been able to test below the figure level yet. Late yesterday, the CBC Governor stated that the authorities allowed the FX to strengthen to reset market dynamics around continued appreciation speculation. It was added that the central bank doesn't have a line in the sand when it comes to FX levels. If we can break sub 30.00, the earlier May low near 29.60 could be in focus.
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BOBL TECHS: (M5) Trend Needle Points North
- RES 4: 120.20 High Dec 12 ‘24 (cont)
- RES 3: 120.000 Psychological round number
- RES 2: 119.960 High Apr 7 and the bull trigger
- RES 1: 119.660 Intraday high
- PRICE: 119.610 @ 05:55 BST Apr 22
- SUP 1: 119.030 Low Apr 17
- SUP 2: 118.595 20-day EMA
- SUP 3: 18.060 Low Apr 10
- SUP 4: 117.680 Low Apr 9 and a key support
Bobl futures traded higher last week and the contract is holding on to its latest highs. Recent weakness appears corrective and a bullish theme remains intact. The early April rally resulted in a break of key resistance at 119.040, the Feb 28 high. This strengthens bullish conditions. The focus is on the 120.000 handle next. Firm support lies at 117.680, the Apr 9 low. The 20-day EMA, an important short-term support, is at 118.595.
AUSSIE BONDS: Holding A Twist-Steepener On First Trading Of The Week
ACGBs (YM +4.0 & XM -1.5) are mixed after pulling back from Sydney session highs on the first trading day following the Easter weekend. The local calendar was light today.
- Cash US tsys are ~1bp cheaper in today's Asia-Pac session after yesterday's long-end sell-off. Fed Vice Chair Philip Jefferson as well as regional Fed chiefs Tom Barkin (Richmond), Neel Kashkari (Minneapolis) and Patrick Harker (Philadelphia) are scheduled to speak later Tuesday. The IMF is also due to release its World Economic Outlook.
- Cash ACGBs are 1-6bps richer with the AU-US 10-year yield differential at -14 bps.
- Swap rates are flat to 4bps lower, with the 3s10s curve steeper.
- The bills strip has bull-flattened, with pricing +1 to +6.
- RBA-dated OIS pricing is 1-7bps softer across meetings today. A 50bp rate cut in May is given a 23% probability, with a cumulative 122bps of easing priced by year-end (based on an effective cash rate of 4.09%).
- Tomorrow, the local calendar will see S&P Global PMIs alongside the AOFM planned sale of A$1000mn of the 3.25% 21 April 2029 bond.
EURUSD TECHS: Fresh Cycle High
- RES 4: 1.1696 1.618 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 3: 1.1625 1.500 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 2: 1.1608 High Nov 9 2021
- RES 1: 1.1573 High Apr 21
- PRICE: 1.1529 @ 06:04 BST Apr 22
- SUP 1: 1.1383 Low Apr 21
- SUP 2: 1.1140 20-day EMA
- SUP 3: 1.0898 50-day EMA and a short-term pivot level
- SUP 4: 1.0805 Low Apr 3
The trend in EURUSD remains bullish and Monday’s cycle high reinforces current conditions and highlights a bullish start to this week’s session. The break higher maintains the price sequence of higher highs and higher lows and note that moving average studies are in a bull-mode position, signalling a continued dominant uptrend. The focus is on 1.1608 next, the Nov 9 2021 high. Key support is unchanged at the 20-day EMA, at 1.1140.
