US: "*NORWAY’S OIL FUND MANAGER PROPOSES US TREASURY HOLDINGS CUT: FT

The AUD/USD has had a range today of 0.7040-0.7053 in the Asia- Pac session, it is currently trading around 0.7050, +0.05%. The AUD has drifted sideways around the 0.7050 area probing its recent highs without being able to extend in Asia. Lots going on, mainly driven by the move lower in Oil as it is being reported that the Straits of Hormuz could be opened imminently. Has Trump walked back his red-lines ? It will be interesting to read the details of this potential deal. The move lower in Oil has seen US bond yields pullback and added further tailwinds to a stock market that was already poised to test higher. Looking at some of the moves across markets I am quite surprised by the muted response in the US Dollar, is it lagging or is it telling us something ? On the day, I have resistance in the 0.7050-0.7080 area. I suspect we might do some work around here initially. I have been skewed toward fading this rally but the headwinds for the USD seem to be building and a sustained push above 0.7100-0.7125 and I will probably have to concede a move back toward the lows becomes a much lower probability.   

• “The US and Iran appeared to be closer to an interim deal to reopen the Strait of Hormuz. Qatar said a proposal had been drafted and Donald Trump discussed the effort with the emir in a call.” - BBG
• MNI - China RatingDog PMIs Fall Further; Fiscal Policies in Focus: The RatingDog Composite PMI in July reached its lowest since July 2025 prompting calls for monetary policy intervention, though fiscal policies appear more likely.
• CFTC Data up to 28/07/2026 shows Asset managers slightly reducing their recently built shorts -32 107(Last -35 779). The Leveraged community added slightly to their core longs, +23 616(Last +20 521).  
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6950(AUD538m), 0.7000(AUD423m). Upcoming Close Strikes : 0.7000(AUD1.65b Aug 6) - BBG
• The AUD/USD Average True Range for the last 10 Trading days: 47 Points

Fig 1: AUD/USD spot Daily Chart

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

• CGB yields remain resolute today in the face of the expected uptick in issuance - though volumes today are not significant.  
• China is selling 2028, 2029, 2031,2041 and 2056 dim sum bonds in small sizes whilst onshore there is a CNY73bn 30-Yr.  
• Issuance is expected to pick up as the economic output moderates.  The NDRC proposed the construction of major projects and key infrastructure projects, seizing the peak construction season in the third quarter, accelerating the disbursement and use of CNY800 bn of new policy-based financial instruments, and speeding up the issuance and use of special-purpose bonds. The PBOC clearly stated that it will intensify efforts to expand domestic demand and optimize supply, while strengthening coordination with local finance and industrial departments to amplify the incentive effect of policies.
• Tomorrow sees 1, 7 and 10-Yr issuance of around CNY300bn as yields remain near to recent lows.  
• The 10-Yr is at 1.70% -  a level by many seen as the floor and unchanged today.  
• Look in the coming weeks for some moderate moves higher in yields with the 10-Yr over the second half of the year heading back towards 1.75%

The EUR/USD range overnight was 1.1503-1.1534, Asia is currently trading around 1.1540. The pair found support back towards 1.1500 as reports the Straits of Hormuz could be opened imminently, adding to risks already significant tailwinds overnight. The pair has moved back toward its recent highs around the 1.1550 area, though considering the extent of some of the other moves seen it does seem to be lagging. I will be watching closely over the short-term to see if this move lower in the USD is anything more than a knee-jerk reaction or is it able to build on its initial reaction. For the short-term it seems we should be prepared for some ranges as those extra USD’s work themselves through the system. I remain skewed in favour of fading rallies with this pivotal weekly 1.1550 area coming back into play.          

• Kantro on X: “Strait of Hormuz opening will lower odds of Fed raising rates this year: Piper Sandler's Kantrowitz”  https://x.com/MichaelKantro/status/2084771108134302036?s=20
• “The US and Iran appeared to be closer to an interim deal to reopen the Strait of Hormuz. Qatar said a proposal had been drafted and Donald Trump discussed the effort with the emir in a call.” - BBG
• Options : Closest significant option expiries for NY cut, based on DTCC data: 1.1450(EU985m), 1.1465(EU984m), 1.1500(EU1.72b). Upcoming Close Strikes :  1.1350(EU2.14b Aug 6), 1.2000(EU1.63b Aug 10). - BBG
• The EUR/USD Average True Range for the last 10 Trading days: 53 Points

Fig 1 : EUR/USD Spot Weekly Chart

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