BONDS: NZGBS: Pre-Election & Fiscal Update & NZGB Borrowing Programme

The BBDXY has had a range today of 1215.95 - 1216.93 in the Asia-Pac session; it is currently trading around 1216. US yields remain under pressure keeping the US Dollar well supported for now. Though it was unable to extend higher overnight as momentum slowed even with such a negative risk backdrop. This break higher technically looks potentially significant to me in the short-term and completely negates the pressure that had been building on the USD. I suspect we could now see the dips in the US Dollar become supported as the market potentially now turns its focus toward a test of the more pivotal 1230 area at some point down the line. Initial support is now back toward 1209-1212 and then the 1200-1205 area looking for the break to consolidate and then build momentum higher at some point.  

• EUR/USD -  Asian range 1.1362-1.1374, Asia is currently trading 1.1362. The pair’s momentum has slowed but the price action remains pretty telling. This break in the USD looks potentially significant to me in the short-term and should add to the Euro’s headwinds. I have been skewed in favour of fading this rally in the EUR, the price action has now turned decidedly bearish and I suspect rallies are now likely to continue to be sold into. On the day the first resistance is back toward 1.1390-1.1425 through here the 1.1500 area comes back into play. Looking for a test of the 1.1300-1.1350 area at some point, a sustained break below there and we could target a move back toward 1.0900-1.1000.     
• GBP/USD - Asian range 1.3239-1.3260, Asia is currently dealing around 1.3240. The pair continues to trade heavy after breaking back below the 1.3450 area. I suspect rallies could now be faded as momentum turns back toward the lower end of the 1.3150-1.3650 range. First resistance is back toward 1.3285-1.3315 which held overnight and then the 1.3400-1.3450 area comes back into play.
• Data: Spain September CPI, UK August Mortgage Approvals, Eurozone September Consumer Confidence, US September Conference Board Consumer Confidence, US August JOLTS Job Openings

Fig 1: EUR/USD Spot Weekly Chart

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

The USD/JPY range today has been 157.21-157.58 in the Asia-Pac session, it is currently trading around 157.40. The pair found demand toward its first support overnight and bounced at the first time of asking. The BOJ has seemingly dropped the ball and the initial green shoots for the Yen look in serious peril. The 149-152 area has now proved to be solid support again. The market is punishing those who turned long Yen and positioning is being reduced as the market gets chopped within this wider range. The 159.00-160.50 area technically looks quite important now and I suspect the BOJ/MOJ will be doing what they can to keep it below there. The first support is toward 156.50-157.00 which held overnight and then the 155.00 area. Can the BOJ/MOF stop a move back toward 160 and above, without any efforts from them to prevent it the move looks almost inevitable. Until then the Choppy 152-160 range looks set to continue.

• "KATAYAMA: EXCHANGED VIEWS ON FX TRENDS WITH BESSENT ON FRIDAY. GENERALLY SPEAKING YEN'S UNDERVALUATION IS A CONCERN. IT WAS MEANINGFUL TO CONFIRM US-JAPAN FX COOPERATION. TAKAICHI IS NOT A REFLATIONIST” - BBG
• MNI - Japan 40Y Auction Delivers A Stronger Result: Demand for today's 40-year bond issuance was solid, with the high yield coming in below dealer expectations. According to a Bloomberg survey, the market anticipated a yield of 4.14%, while the actual result came in at 4.125%.
• Options : Close significant option expiries for NY cut, based on DTCC data: 155.00($327m), 157.00($385m), 157.50($461m). Upcoming Close Strikes : 154.00($1.48b Oct 1), 157.00($1.78b Oct 2), 158.00($2.3b Oct 2) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 115 Points

Fig 1 : USD/JPY Spot Daily Chart

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

The NZD/USD had a range today of 0.5656-0.5677 in the Asia-Pac session; it is currently trading around 0.5667. The pair tried to bounce off the 0.5650 area as the government trimmed borrowing plans, it has been unable to follow through. Risk remains under some pressure, though considering some of the moves overnight the pair is holding up okay for now. Initial resistance is toward 0.5700-0.5730 and above here the 0.5775-0.5825 area comes back into play. I suspect the broader US Dollar will need to build on its break higher for the pair to test the year's lows toward 0.5500-0.5600. 

• MNI - NZ Incumbent Government Forecasting Lower Deficits & Issuance: The Pre-Election Economic and Fiscal Update showed better deficit and debt positions compared with the May budget across years. The election is 7 November and polls continue to be very tight signalling a highly uncertain outcome, which could mean that budget projections change substantially.
• (Bloomberg) - “New Zealand bond yields erase earlier uptick after the government trims its borrowing plan by NZ15 Billion($8.5 billion). The 2026-2031 bond program has been reduced to NZ$134 billion.”
• Options : Closest significant option expiries for NY cut, based on DTCC data:  0.5800(NZD352m). Upcoming Close Strikes : 0.5850(NZD747m Sept 30), 0.5950(NZD542m Sept 30) - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 37 Points

Fig 1: NZD/USD Spot Daily Chart

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