BONDS: NZGBS: 2yr Swap Close To 20-day EMA Resistance, RBNZ Gov Speaks
NZGB yields have started Wednesday trade off relatively steady, still under key resistance levels. This follows an indifferent Tuesday US session. We do have an RBNZ Governor speech today (on central bank independence), while spill over from the Q3 Aust CPI is also possible. Anticipation is also building ahead of the likely Fed cut and possible decision to end QT (later on Wednesday). Front end US Tsy yields were a touch firmer in Tuesday trade, while the 10yr yield drifted down (remaining sub 4.00%).
- For NZGBs yields hold close to recent highs, 2.535% for the 2yr, 3.99% for the 10yr. Upside focus rests at 2.61% for the 2yr (which is the 20-day EMA), while recent lows are near 2.50%. The 10yr 20-day EMA is near 4.07% (recent lows around 3.95%).
- The 2yr swap is relatively steady in early trade, near 2.36%, which is close to its 20-day EMA resistance point (2.38%).
- In the cross asset space, US equity sentiment was mostly supported, although oil prices moved off recent highs.
- RBNZ Governor Hawkesby will speak about the importance of central bank independence just after 5pm local time today (04:05 BST). Given the new incoming RBNZ Governor will be in place soon Hawkesby may not touch much on the short term monetary policy outlook. A 25bps cut for the Nov meeting is fully priced.
- The local data calendar is empty today, but be mindful of spill over from the Aust CPI print, where Nov RBA easing expectations have been pared back in the wake of recent cautious RBA Governor Bullock comments.
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NEW ZEALAND: Monthly Data May Shape OCR Expectations
This week will provide more information on how NZ’s recovery tracked in Q3. The higher frequency data have been the focus of the RBNZ for over a year and so should help shape expectations for the 8 October RBNZ decision where some are forecasting a 50bp rate cut following the very weak Q2 GDP print.
- The ANZ business survey for September is released on Tuesday. The activity assessment compared to a year ago is an important signal for GDP in the quarter. Business confidence and the activity outlook are off the May lows, following the announcement of US tariffs, but remain below the Q4 2024 peak. The price/cost components are also important to monitor.
- On Wednesday, August building permits print. They rose 5.4% m/m in July but the construction sector as a whole has been weak for some time.
- Cotality home values for September are scheduled to be released between October 1 and 10. August was the fifth consecutive monthly decline in house prices, which may be weighing on consumer confidence.
ASIA: Coming Up In Asia Pac Markets On Monday
| 2345BST | 0645HKT | 0845AEST | New Zealand Aug Filled Jobs |
| 0300BST | 1000HKT | 1200AEST | South Korea Sell KRW 2.4tln 2-yr Bonds |
| 0600BST | 1300HKT | 1500AEST | Japan Jul F Leading/Coincident indices |
| 0630BST | 1330HKT | 1530AEST | Japan BoJ Noguchi speaks |
USDCAD TECHS: Breaches The Bull Trigger
- RES 4: 1.4111 High Apr 10
- RES 3: 1.4019 38.2% retracement of the Feb 3 - Jun 16 bear leg
- RES 2: 1.3968 High May 20
- RES 1: 1.3959 High Sep 25
- PRICE: 1.3939 @ 19:10 BST Sep 26
- SUP 1: 1.3885/3800 Low Sep 25 / 50-day EMA
- SUP 2: 1.3727 Low Aug 29 and a bear trigger
- SUP 3: 1.3689 Low Jul 28
- SUP 4: 1.3637 Low Jul 25
Last week’s rally in USDCAD cancels a recent bearish theme and instead strengthens a bullish outlook. The pair has breached a key resistance at 1.3925, the May 20 high and bull trigger. The breach confirms a resumption of the bull cycle that started Jun 16. This paves the way for a climb towards 1.4019, a Fibonacci retracement point. On the downside, first key support lies at 1.3800, the 50-day EMA.
