NZD: NZD/USD - Consolidating On A 0.59 Handle
The NZD/USD had a range overnight of 0.5932 - 0.5967, Asia is trading around 0.5960. US equities struggled in the N/Y session which saw the NZD’s momentum higher stall. The headline that Trump is set to nominate Miran to the short-term Fed Board vacancy saw a late move lower in the USD across the board. The market is very quick to use any excuse to sell the USD, Miran’s views on the USD are well publicised but at most he will add 1 more dovish vote to a board that seems to already be turning that way. Can he actually alter the policy on the USD from this position ? Risk has opened a little higher this morning, E-minis +20%, NQU5 +0.25%. NZD/USD bounced nicely off its 0.5850 support but depending on your view I would suspect sellers could return on any bounce back toward 0.6000/0.6050. For the moment back in the 0.5850-0.6100 range looking for a catalyst to break and give clearer direction.
- ASB Sees More Easing To Support Labour Market. Q2 data showed a pickup in the unemployment rate, a fall in employment and hours worked and as a result a sharp rise in underutilisation. The spare capacity in the labour market drove wage inflation lower and ASB believes this signals underlying inflation is headed towards the midpoint of the 1-3% RBNZ band. This and jobs weakness are likely to mean a 25bp OCR cut in August and the risk that it ends the year below 3% as the RBNZ may deem further intervention appropriate.
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5920(NZD583m Aug 11), 0.5930(NZD646m Aug 11). - BBG
- CFTC Data shows Asset Managers again reduced their newly built longs in NZD +3903(Last +5034), the Leveraged community reduced their shorts slightly -6250(Last -7328).
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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NZD: NZD/USD - Holding Onto 0.6000 Support For Now
The NZD/USD had a range overnight of 0.5980 - 0.6029, Asia is trading around 0.6000. The NZD/USD again found some demand just below 0.6000 as the market continues to test this support. If there is a deeper correction in risk and the USD can squeeze higher then the risk to the NZD is a move back towards the 0.5850/0.5900 area, the bulls will be hoping the support just below 0.6000 continues to hold.
- MNI RBNZ Decision - The RBNZ is expected to hold policy rates steady today. Little is pricing in from a market pricing standpoint, while the majority of sell-side analysts see no change. Those looking for a move see a 25bps cut next week, but are in the minority. There remains much uncertainty around the NZ economic recovery, but the central bank probably doesn't need to be urgent and act now. The tick up in inflation expectations also warrants an on hold outcome at this meeting.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6075(NZD519m). Upcoming Close Strikes : 0.6000(NZD407m July 10), 0.6025(NZD373m July10).
- CFTC Data shows Asset Managers have reduced their newly built longs in NZD +8515, the Leveraged community reduced their short last week -8424.
- Data/Event : RBNZ Cash Rate
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
AUSSIE 10-YEAR TECHS: (U5) Rolling Off Highs
- 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: 95.650 @ 16:07 BST Jul 08
- 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 traded under pressure for much of last week, keeping prices pressured and within range of the recent pullback lows. 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.
AUD: AUD/USD - Settles Down After RBA Surprise
The AUD/USD had a range overnight of 0.6508- 0.6548, Asia is trading around 0.6525. After the initial 50 point surge in response to the RBA surprising the market, the pair drifted back down as it took its cues from the USD. We have seen this ‘movie’ before and it normally ends with the USD faltering and moving lower again, is this time different ? The AUD needs to hold above its 0.6480/0.6500 support as a sustained move below there would see a deeper correction back to 0.6350/0.6400.
- (Bloomberg) -- “The shock call and market ructions worsened criticism that radio silence from Governor Michele Bullock and her board had left markets rudderless, despite a wide-ranging effort by the RBA to do the opposite — improve communications.”
- “Former RBA Assistant Governor Luci Ellis said that episodes of the RBA surprising market pricing "will be more common" due to fewer inter-meeting speeches and a reliance on post-decision briefings.”
- “Bullock’s main message today was that the hold decision wasn’t about policy direction, but timing. She wants to see the next quarterly consumer price index reading to ensure prices are in check”
- The AUD/USD bounced strongly off its support around 0.6500, looks like its back to the 0.6500 - 0.6600 range and it should now take its cues from the USD. Watching to see if the support continues to hold as a move through there signals a deeper correction.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6425(AUD700m), 0.6550(AUD 607m). Upcoming Close Strikes : 0.6650(AUD857m July 10), 0.6600(AUD634m July 10), 0.6650(AUD599m July 11)
- CFTC Data shows Asset managers pared back their shorts slightly -35992, the Leveraged community maintained their shorts -22903.
Fig 1: AUD/USD spot Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
