FOREX: Muted G10 FX Trading Ahead Of NY, Kiwi Underperforming

The AUD/USD has had a range today of 0.6531 - 0.6557 in the Asia- Pac session, it is currently trading around 0.6545, -0.10%. The AUD/USD has had a subdued session considering the risk-off start to the week. Asia has broadly sold the USD as USD/JPY trades lower, but if this risk-off start to the week turns into something more I would look for the USD to potentially bounce against risk currencies. The AUD is consolidating around 0.6550 just below the pivot toward 0.6550-60 within its wider 0.6350-0.6700 range. On the day, I would not be surprised to see the AUD/USD drift back toward the 0.6490-0.6510 area on the back of this shaky start to the week. 

• MNI POLICY: RBA Sees Balanced Risk, Despite Monthly CPI Shock. The Reserve Bank of Australia continues to view the 3.6% cash rate as somewhat restrictive, despite recent strong inflation data, including October’s monthly print, which policymakers will largely look through, MNI understands.
• MNI AU - Wages Bill Continues Rising, Q3 Inventories Flat: Q3 Australian company profits were weaker than expected posting a flat outcome on the quarter after Q2’s sharp fall of 2.6% q/q and are now up only 1.1% y/y (strongest since Q1 2023 though). Inventory volumes fell 0.9% q/q which is likely to be a small detraction from Q3 GDP growth currently expected to rise 0.7% q/q and released on Wednesday. The net export and public demand contributions are released Tuesday.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6400(AUD445m), 0.6425(AUD444m), 0.6550(AUD521m). Upcoming Close Strikes : 0.6490(AUD710m Dec 4) - BBG
• The AUD/USD Average True Range for the last 10 Trading days: 39 Points

Fig 1: AUD/USD spot Daily Chart

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

Continuing Friday’s pattern, silver is outperforming gold in Monday’s APAC session. Silver benefits from high physical demand and the market is currently tight. Prices are up 1.3% to $57.22/oz after an intraday high of $57.864, a new record, and 5.8% rise on Friday. In comparison, gold is flat today at $4238.7/oz reaching $4256.48 earlier and rising 2.0% on Friday. Both metals have found support from increased Fed rate cut pricing which is now at 23pp for the 10 December decision. Yields and the US dollar are little changed today. 

• Silver moved above the bull trigger at $54.480 and three other resistance levels including $56.153, a Fibonacci projection, confirming a resumption of the primary uptrend.
• Bloomberg reported that silver inventories in the Shanghai Futures Exchange have fallen to their lowest in almost 10 years.
• However, Pepperstone Group believes that silver is being driven by “speculative flows” which given the substantially lower volumes than gold is creating the recent large price moves.
• Equities are mixed with the S&P e-mini down 0.7% and Nikkei -1.8% but Hang Seng is up 0.8% and SE Thai +0.8%. Oil prices are higher with WTI +1.6% to $59.50/bbl. Copper is up 1.5%.
• Later US November manufacturing ISM/PMI, UK October lending and European November manufacturing PMIs are released. 

The BBDXY range Friday night was 1217.18 - 1221.55, Asia is currently trading around 1217, -0.05%. Risk has turned very quickly to start the week in Asia thanks to a combination of poor Chinese PMI’s over the weekend and Japanese yields continuing to extend higher as the market prices in a potential December BOJ rate hike. The USD moved lower initially as Asia tends to follow the moves seen in USD/JPY, I suspect we might see this start to differentiate once London comes in. On the day I will be watching to see if the USD can bounce against risk currencies should this risk-off start to the week expand on its initial moves. On the day resistance is back towards the 1222-1224 area where sellers should remerge initially, a sustained break back above here and the market would again turn its focus to the pivotal 1230-1240 area.

• The BBDXY Average True Range for the last 10 Trading days: 366 Points

Fig 1: BBDXY Daily Chart

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