US CREDIT UPDATE: MNI US CREDIT BDC/Alt Fins: Week in Review

Coming up shortly we have the NZ Q3 GDP print. The market consensus is for a +0.9%q/q rise, which follows a -0.9% contraction in Q2. In y/y terms this would raise growth to 1.3%y/y, from -0.6% in Q2. Note in its Nov projections the RBNZ had a 0.4%q/q growth forecast for Q3 GDP, so the consensus is comfortably above this. The range of market forecasts is 0.6% to 1.1%, with the local banks around the 0.8-1.0% region. Focus will also likely be on revisions to prior history (Q2 or before).   

The NZD/USD had a range overnight of 0.5767 - 0.5794, Asia is trading around {NZD Curncy}. The bounce in AI lasted 1 day and is lower again, the move is starting to turn ugly as sentiment is quickly changing. The NASDAQ and the S&P both look to potentially be putting in double tops and the likes of Nvidia is approaching some pivotal levels as well. This does not augur well for risk and creates significant headwinds for the AUD & NZD which trade with a high correlation to it. The NZD is consolidating its gains above 0.5700-0.5750 and for the most part has been left unscathed by the souring of sentiment. Can it continue to ignore it if the correction builds momentum? On the day, I will be watching the price to see if it can continue to shrug this off, if so then the range will remain, support is back toward 0.5740-0.5760 and resistance is around 0.5810-30. A break through that support could signal the potential for a deeper pullback.

• MNI - NZ Q3 GDP is released Today. After activity contracted 0.9% q/q in Q2, some rebound is expected in Q3 and also into Q4. The RBNZ forecast a 0.4% q/q rise in Q3 GDP in November. The partial data are pointing to a solid outcome with real retail sales rising 1.9% q/q, building volumes +1.5% q/q, manufacturing volumes +1.1%, real merchandise exports up 3.5% q/q while imports were down 1.2% q/q.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5650(NZD410m), 0.5690(NZD531m), 0.5860(NZD471m). Upcoming Close Strikes : 0.5530(NZD475m Dec 23), 0.5630(NZD594m Dec 19), 0.5750(NZD459m Dec 19) - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 40 Points
• Data/Event: GDP

Fig 1: NZD/USD Spot Daily Chart

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

The AUD/USD had a range overnight of 0.6599-0.6629, Asia is trading around {AUDUSD Curncy}. The bounce in AI lasted 1 day and is lower again, the move is starting to turn ugly as sentiment is quickly changing. The NASDAQ and the S&P both look to potentially be putting in double tops and the likes of Nvidia is approaching some pivotal levels as well. This does not augur well for risk and creates significant headwinds for the AUD which trades with a high correlation to it.  The AUD price action for the moment remains constructive, but I do remain wary of what seems to be happening in US stocks. Technically while the AUD remains above 0.6500-0.6550 dips should continue to be supported. In the Asian session, watch to see if this 0.6600 area can continue to hold in the face of this souring in sentiment, if not we could see a deeper pullback towards the 0.6500-50 support. On the day I suspect sellers would be looking to fade a bounce back toward the 0.6625-0.6645 area initially looking to see if we can break back below 0.6600.

• Bloomberg reports, “China Vanke asked some commercial banks to accept delayed interest payments on certain borrowings, people familiar said. At least one lender was asked to let the developer delay an interest obligation by one year.”
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6550(AUD1.07b), 0.6625(AUD849m), 0.6675(AUD989m). Upcoming Close Strikes : 0.6675(AUD1.31b Dec 19), 0.6700(AUD1.57b Dec 19) - BBG
• The AUD/USD Average True Range for the last 10 Trading days: 40 Points
• Data/Event: Consumer Inflation Expectation

Fig 1: AUD/USD spot Daily Chart

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