FOREX: NZD Outperforms On OIS Re-Pricing, Steady Trends Elsewhere
The USD was under pressure at the NY/Asia Pac cross over, as headlines crossed from Bloomberg that Trump economic advisers were considering/studying a gradual tariff hike approach. This reportedly hasn't been present to incoming President Trump yet. The BBDXY opened at lows near 1314, not too far off pre NFP levels from last Friday, but we found some support and last track near 1317.1 (still off a little over 0.20%).
- NZD/USD has been an outperformer, rising over 0.40%, to put the pair back above 0.5605. We are still short of the 20-day EMA resistance level, which comes in around 0.5640.
- Outside of the above BBG article, which weighed on broad USD sentiment, NZD was aided by the more positive Q4 NZIER Business Opinion Survey. Whilst the survey warned of on-going recession risks, the outlook for 2025 is on the improve. RBNZ dated OIS pricing closed 3-18bps firmer across meetings, with late 2025 leading. The expected official rate for November has firmed 30bps since Friday’s close. This has aided NZ-US yield differentials.
- AUD/USD has risen, but lagged NZD moves, last near 0.6185, up around 0.15%.
- Yen has lagged NZD shifts and modest AUD gains, although GBP & EUR have given up earlier gains as well. USD/JPY spiked towards 158.00 as BoJ Deputy Governor Himino spoke. However, as Himino noted that a rate would be discussed at the upcoming meeting, along with noting real yields shouldn't stay negative when deflationary forces end, USD/JPY moved off highs. The pair was last near 157.50, little changed for the session.
- In the cross asset space, US equity futures are higher, regional equities are mostly firmer as well, led by China/HK. Japan has lagged as onshore markets return from yesterday's long weekend. US yield are down a touch.
- Looking ahead, we have US PPI in focus, along with some central bank speak.
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MACRO ANALYSIS: MNI US Macro Weekly: Inflation Data Keep Fed Cut On Track
We have published and e-mailed to subscribers the MNI US Macro Weekly offering succinct MNI analysis across the range of macro developments over the past week. Please find the full report here:
USDCAD TECHS: Fresh Cycle High
- RES 4: 1.4393 2.0% 10-dma envelope
- RES 3: 1.4327 2.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4296 2.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4246 2.00 proj of the Oct 17 - Nov 1 - 6 price swing
- PRICE: 1.4236 @ 16:38 GMT Dec 13
- SUP 1: 1.4069/3944 20- and 50-day EMA values
- SUP 2: 1.3928 Low Nov 25 and a key support
- SUP 3: 1.3822 Low Nov 6
- SUP 4: 1.3747 Low Oct 17
The trend direction in USDCAD remains up and this week’s gains to a fresh cycle high, reinforces the current bullish theme. The pair has cleared 1.4178, the Nov 26 high, to confirm resumption of the uptrend and maintain the price sequence of higher highs and higher lows. Sights are on 1.4246 next, a Fibonacci projection. Key short-term support has been defined at 1.3928, the Nov 25 low. Initial support to watch lies at 1.4069, the 20-day EMA.
US TSYS: Extending Late Session Lows, Curves Bear Steepen Ahead Next Wed's FOMC
- Treasuries traded steadily lower throughout Friday's session, initially mirroring weak action in Bunds and Gilts. By the close, the Mar'25 10Y contract slipped to 109-26 (-18) the lowest level since November 22, 10Y yield rising to 4.4046% high (+.0768).
- Initial technical support at 109-22 (76.4% Nov 15 - Dec 6 Upleg) followed by 109-20 (Low Nov 20/21).
- Curves bear steepened: 2s10s +2.272 at 15.568 as short end rates outperformed ahead of next week's FOMC policy announcement where another 25bp rate cut was expected but not certain amid current macro and political uncertainty. That said, the latest unemployment and inflation data have kept the FOMC on track to cut the federal funds rate by 25bp (to 4.25-4.50%) next Wednesday.
- Projected rate cuts into early 2025 look near steady to lower vs. this morning levels (*) as follows: Dec'24 cumulative -24.3bp (-23.7bp), Jan'25 -28.6bp (-29.6bp), Mar'25 -42.2bp (-43.9bp), May'25 -48.4bp (-50.5bp).
- No reaction to this morning's import/export prices, Monday brings flash S&P Global PMIs, Retail Sales, IP & Cap-U on Tuesday.
