NZD: NZD/USD - Consolidates Around 0.6550, Awaits FOMC

USD/CNH tracks just under 7.1700 in early Monday dealings, after losing a little ground versus the USD on Friday. Broader USD indices were firmer on Friday, albeit up only marginally from recent cycle lows. Spot USD/CNY finished up at 7.1726, while the CNY CFETS basket tracker lost 0.16%, to be at 95.36, which is fresh cycle low.

• For USD/CNH technicals, downside focus will be on last week's low of 7.1525. A fresh break lower could see early 2024 Nov lows under 7.1000 ultimately targeted. On the topside, the 20-day EMA, close to 7.1820, has been an upside resistance point through June.
• Recent momentum in US-CH yield differentials has been to the downside, albeit we saw some stability on Friday, which likely aided the USD at the margins. The China to global equity ratio has tracked a little lower, but remains above recent lows from early June.
• Focus will remain on US-China trade relations, although further strong progress in the near term may not be forthcoming, as US focus rests on finalizing deals elsewhere (with talks with Japan and India in focus).
• On the data front today, we have the official PMI prints for June. The manufacturing outcome is expected at 49.6 (49.5 printed in May), while non-manufacturing is expected at 50.3, unchanged from the June outcome. 

• RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
• RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
• RES 1: 95.960 - High Apr 7 
• PRICE: 95.795 @ 16:02 BST Jun 27
• SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14  
• SUP 2: 95.275 - Low Nov 14  (cont) and a key support
• SUP 3: 94.707 - 1.0% 10-dma envelope

Aussie 10-yr futures rallied well on the RBA rate decision, reversing a small part of recent weakness. Recent price action pressured prices through to new pullback lows last week. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition. To the upside, a recovery of recent losses would shift attention to resistance at 96.207, a Fibonacci retracement point.

The AUD/USD had a range Friday night of 0.6508 - 0.6561, Asia is trading around 0.6535. The AUD/USD again stalling around the 0.6550 area. Stocks had a decent pullback resulting from Trump ending trade talks with Canada on Friday, this saw a rally in the USD. For the week the risks look to be the same, Can the USD extend lower ? If so the AUD/USD should have another look above 0.6550 and see if it can gain the momentum to build for a more sustained move higher. CFTC data shows the market is still happy to add to AUD short, you would think the majority of that would be in the crosses.

• (Bloomberg) - "Australia said earnings from commodity exports fell about 7% to an estimated A$385 billion ($252 billion) in the 12 months through June, and expects income to decrease further in the next two years."
• (Bloomberg) - “Australia’s central bank should ditch a new goal of hitting the midpoint of its 2-3% inflation band as the benchmark imposes unrealistic expectations on policymakers, according to Brian Redican, chief economist at sovereign investment manager TCorp.”
• The AUD/USD is attempting to break through the top of its recent range as the pressure on the USD increases .
• The AUD needs a sustained break above 0.6550/0.6600 to potentially start building momentum for an extended move higher, a close back above 0.6600 and the focus would turn back to 0.6900/0.7000.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6425(AUD836m). Upcoming Close Strikes : 0.67500(AUD1.27b July 2), 0.6600(AUD907m July3).
• CFTC Data shows Asset managers increasing their shorts -36967, the Leveraged community has also added to their shorts -22963.
• Data/Event: Melbourne Institute Inflation, Private Sector Credit 

Fig 1: AUD/USD spot Daily Chart

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