NZD: NZD/USD - Outperforms Thanks To RBNZ
The NZD had a range overnight of 0.5944 - 0.5978, Asia is trading around 0.5965. The NZD continued to outperform across he board overnight even as the USD built on its gains.
- “The revelation that the decision to cut was not a unanimous one has been interpreted as a hawkish signal by financial markets,” wrote Capital Economics economist Abhijit Surya.”(BBG)
- (Bloomberg) -- “RBNZ revised Official Cash Rate projections indicate a baseline expectation of one or two further cuts by the end of this cycle, with one of those cuts to occur in the third quarter, Westpac New Zealand Chief Economist Kelly Eckhold says in an emailed note.”
- “Now sees the next 25 bps cut to 3% at the August MPS, previously expected the cut to 3% in July. Says RBNZ “could easily be done if the downside risks don’t crystallize”
- The NZD continues to trade in a 0.5850/0.6050 range, the hawkish slant from the RBNZ is probably seeing a good portion of the new shorts added last week by leveraged accounts pared back.
- The support back towards 0.5800 has held very well, and while this continues to hold expect buyers to be around on dips. A break above 0.6050 is needed to provide the spark for the next leg higher.
- CFTC Data showed Asset managers maintaining their shorts, while the leveraged community added a decent clip back to their own short.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5975(NZD440m). Upcoming Close Strikes : 0.6100(NZD375m June 3)
Data/Event : ANZ Activity Outlook, Business Confidence
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg
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ASIA: Coming Up in Asia Today
| 2100GMT | 1000HKT | 1200AEDT | South Korea Retail Sales YoY MAR |
| 2100GMT | 1000HKT | 1200AEDT | South Korea Department Store Sales YoY MAR |
| 2100GMT | 1000HKT | 1200AEDT | South Korea Discount Store Sales YoY MAR |
| 2230GMT | 1130HKT | 1330AEDT | Thailand Car Sales MAR |
AUSSIE 10-YEAR TECHS: (M5) Remains Toward Top End of Recent Range
- 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: 95.820 @ 16:35 GMT Apr 28
- SUP 1: 95.420/95.300 - Low Feb 13 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.640 - 1.0% 10-dma envelope
Aussie 10-yr futures extended a recent strong bounce through to the Friday close, putting prices through the top end of the recent range. The confirmed breach of 95.851, the Dec 11 high on the continuation contract, reinstates a bull cycle and focuses attention on resistance at 96.207, a Fibonacci retracement point. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
US TSYS: Treasury Yields Continue To Drift Lower
TYM5 reopens at 111-29, unchanged from closing levels in today’s Asia-Pac session.
- Overnight US 10-year yields had a range of 4.2005% - 4.2952%, closing at the lows.
- Treasury yields finished lower overnight, down by up to 7bps in the front-end, steepening the yield curve.(2s10s +2.61 at 50.934).
- Month-end flows are also in play for the start of this week, which appeared to add some late support into Treasuries around 3pm New York.(per BBG)
- The U.S. Treasury on Monday increased its estimate for federal borrowing for the current quarter by USD391 billion to USD514 billion, while reiterating its previous assumption for cash balance at the end of June, assuming that Congress eventually raises or suspends the debt limit.(per MNI Policy)
The 10-year Yield, has put in a lower high around 4.40% and has broken through the recent support around 4.25%. The next support is towards the 4.10 area which should find supply once more as the market will continue to look for higher term premium while uncertainty remains elevated.
