NZD: NZD/USD - Dragged Back Toward 0.6100 As The USD Gets Hit

The AUD/USD has had a range today of 0.6678 - 0.6707 in the Asia- Pac session, it is currently trading around {AUDUSD Curncy}. The AUD poked its head above 0.6700 in Asia as the USD had a knee-jerk lower on the FED news. The AUD price action had been lagging the general bounce seen in the USD to start the year, the 0.6650 area continues to provide support and has seen the AUD outperform in the crosses. A break below this area is needed to see it play catch up in the short-term. Technically though while the AUD remains above 0.6550-0.6600 it should continue to find support on dips. On the day, I will be watching to see if this slide lower in the USD has more to go, a sustained push back above 0.5710-0.5730 could see the upward momentum reestablished.

• MNI AU -- Nov Spending Above Forecasts, Reflecting Broad Based Strength: Earlier data showed stronger than expected Nov household spending figures. This series has replaced the retail sales print as the main monthly indicator for household spending trends in Australia. We were up 1.0%m/m (0.6% forecast), while the Oct outcome is now +1.4% (versus the initial 1.3% reported). In y/y terms, spending rose 6.3% (versus 5.5% forecast and 5.7% prior).The spending data may add a little to the RBA hike case for 2026, although inflation data is likely to remain the key swing factor. Other data for ANZ job ads showed a -0.5%m/m for Dec, after a revised -1.5% fall in Oct.
• "AUSTRALIA RESOURCES MINISTER KING: CRITICAL MINERALS RESERVE WILL BE OPERATIONAL BY END OF THIS YEAR - [RTRS]"
• CFTC Data last week shows Asset managers slightly reduced their shorts, -31901(Last -33138). The Leveraged community has been building a decent long coming into the new year and continues to add to it, +33775(Last +32268).
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6660(AUD360m), 0.6725(AUD597m), 0.6580(AUD578m). Upcoming Close Strikes : 0.6700(AUD962m Jan13), 0.6700(AUD625m Jan14), 0.6750(AUD911m Jan14) - BBG
• The AUD/USD Average True Range for the last 10 Trading days: 35 Points

Fig 1: AUD CFTC Data

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

The Friday night range was 1.1618 - 1.1660, Asia is currently trading around {EURUSD Curncy}. The pair is getting an early bounce in Asia as the USD gets sold on reports the FED is to potentially be indicted. We are firmly back in the 1.1450-1.1850 range which dominated the last 6 months of the year and we need a catalyst to get a break and some sort of a trend going again. It will be interesting to see how much of a headwind this news brings for the USD as it was just looking to build a head of team to test higher. On the day look for sellers to reemerge in EUR/USD back toward the 1.1665-1.1695 area.

• CFTC Data of last week shows Asset Managers slightly increasing their long positions in the EUR, +424 424(Last +416 483). The Leveraged community reduced their own longs slightly which have only recently been built up, +22279(Last +24505).
• The EUR/USD Average True Range for the last 10 Trading days: 44 Points

Fig 1 : EUR CFTC Data

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

The AU–NZ 10-year yield differential currently sits at +28bps, around 10–15bps below its recent peak of approximately +40bps, the widest since October 2020.

• The widening in the long-end spread has been mirrored by shifts in market expectations for the policy rate differential over the next year, as reflected in the AU–NZ 1-year forward 3-month swap (1Y3M) spread.
• A simple regression analysis of the AU-NZ 10-year yield differential against the AU-NZ 1Y3M spread over the past two years shows that the 10-year differential is around fair value based on the regression model.

Figure 1: AU-NZ: 10-Year Yield Differential Vs. FV

Source: Bloomberg Finance LP / MNI