NZD: NZD Outperforms, AUD/NZD Finds Selling Interest Above 1.1400
NZD/USD tracks in the 0.5815/20 region in early Thursday trade, after rising 0.40% for Wednesday's session. Broader USD sentiment was mostly softer in Wednesday trade (although AUD and EUR were little changed). JPY outperformed amid the softer ADP print in the US, and government shutdown uncertainty. Still the BBDXY and DXY indices were only down a touch.
- For NZD/USD intra session highs from Wednesday were just above 0.5830. Further north we have the 20-day EMA resistance point, close to 0.5850/55, while the 100 and 200-day points sit just above 0.5900.
- NZD outperformed the AUD, with the AUD/NZD cross finding selling interest above 1.1400. This was fresh highs back in the cross back to 2022. We have been in overbought territory for a number of weeks, per the RSI (14). The cross was last near 1.1365/70, a little out of sync with AU-NZ 2yr swap spreads near +94.5bps. Note that 20-day EMA is not under 1.1260/65, so we are some distance from support.
- In the cross asset space, US and global equities were mostly higher in Wednesday trade. The Bloomberg commodity index was also up, +0.69%.
- The local data calendar is empty today. We did get Sep Auckland house sales and home price data, via Barfoot & Thompson. per BBG, average prices rose 0.8%m/m in Sep, while in y/y terms we were up by the same amount. Sales rose in m/m (the best Sep figures in four years), but were still down in y/y terms.
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AUD: AUD/USD - Drifting Higher Within Its Range
The AUD/USD had a range overnight of 0.6535-0.6560, Asia is trading around 0.6555. The AUD again drifted higher but without any real momentum. The AUD finds itself firmly back in the middle of its recent multi-month range of 0.6350-0.6650 with little clear long-term direction. The market will be looking towards NFP at the end of the week to hopefully be a catalyst.
- MNI: RBA November Cut Eyed, Lower Productivity To Pull Down R*. The Reserve Bank of Australia is likely to hold at its September meeting before delivering another 25-basis-point cut to the 3.6% cash rate in November, former staffers and leading economists told MNI, with the Bank’s downgraded productivity outlook expected to weigh on neutral rate estimates over the longer term.
- (Bloomberg) - “Australia’s No. 2 Pension Cuts Treasuries Bet on Rising US Risks. Australian Retirement Trust Pty is underweight US bonds due to concerns that Washington's policies may stoke inflation. The fund's senior portfolio manager Jimmy Louca says there's better value elsewhere, such as in the UK and Australia. Louca is also bearish on the dollar and prefers currencies such as the yen, and even gold, due to the policy mix coming out of the White House.”
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6400(AUD770m). Upcoming Close Strikes : 0.6400(AUD1.12b Sept 5), 0.6500(AUD974m Sept 5), 0.6600(AUD1b Sept 5) - BBG
- CFTC Data last week shows Asset managers continue to add to their shorts -78758(Last -72904), the Leveraged community though again reduced their own shorts -6447(Last -7818).
- Data/Event: Current Account Balance
Fig 1: AUD/USD spot 2HChart
Source: MNI - Market News/Bloomberg Finance L.P
CNH: USD/CNH Rebounds Back Above 7.1300 As Yuan Gains Slow
USD/CNH spot tracks near 7.1330 in early Tuesday dealings. The pair gained 0.16% for Monday's session, after the pair mostly rallied post the Asia close on Monday. Spot USD/CNY finished up at 7.1377, while the CNY CFETS basket tracker edged down a little to 96.53 (-0.05% off Friday's end level). Broader USD indices were down a touch on Monday in holiday impacted markets, with the US out to start the week.
- For USD/CNH spot, upside focus is likely to rest in the 7.1400/7.1500 region, which marked a number of lows in July and August and may now act as an upside resistance point. The 20-day EMA is back near 7.1600, while the 50-day is close to 7.1750. Recent lows in the pair were at 7.1159.
- BBG noted late yesterday: "Chinese state banks were seen to buy dollars when USD/CNY was trading at around 7.13 level on Monday, according to traders." This coupled with a higher USD/CNY fixing yesterday may have been enough to curb USD/CNH downside after the break lower late last week.
- The market bias is likely to remain to fade upticks in the pair, given broader USD risks and viewpoints around the yuan being cheap relative to trading imbalances.
- Yesterday the RatingDog PMI moved back into expansion territory on the manufacturing side. Tomorrow delivers the services and composite PMI measures for August. Any further improvement will be welcome given recent hard data outcomes were weaker for July.
ASIA: Coming Up In Asia Pac Markets On Tuesday
| 2345BST | 0645HKT | 0845AEST | New Zealand Q2 Terms of Trade |
| 0000BST | 0700HKT | 0900AEST | South Korea August CPI |
| 0050BST | 0750HKT | 0950AEST | Japan August Monetary Base |
| 0200BST | 0900HKT | 1100AEST | Australia 2034 Bond Sale |
| 0230BST | 0930HKT | 1130AEST | Australia Q2 Net Exports |
| 0230BST | 0930HKT | 1130AEST | Australia Q2 BoP Current A/C |
| 0230BST | 0930HKT | 1130AEST | BoJ Deputy Governor Himino Speaks |
| 0335BST | 1035HKT | 1235AEST | New Zealand Bill Sale |
| 0435BST | 1135HKT | 1335AEST | Japan 10yr Debt Sale |
Source: Bloomberg Finance L.P/MNI
