BONDS: NZGBS: Solidly Cheaper Despite Solid Demand At Weekly Supply Auctions
NZGBs closed 4-5bps cheaper, tracking global bonds. The NZ-US 10-year yield differential was unchanged on the day. Cash US tsys are flat to 2bps cheaper in today’s Asia-Pac session.
- Today’s weekly supply auctions drew strong demand, with cover ratios ranging from 3.58x (May-35) to 4.98x (may-31).
- (Bloomberg) “The number of New Zealanders moving to Australia is at its highest level in 12 years, with about 41,000 people making the move last year. Australia is the top destination for New Zealand migrants, with higher pay and stronger career prospects being a major draw, and the wage gap between the two countries is significant. The exodus of New Zealanders to Australia has become a major political issue ahead of New Zealand's general election, with opposition leader Chris Hipkins tying the departures to high living costs and limited opportunity at home."
- Swap rates closed 4-5bps higher.
- RBNZ-dated OIS pricing closed firmer across meetings. No tightening is priced for April, while December 2026 assigns 38bps.
- Tomorrow, the local calendar will be empty and will remain so until next Thursday release of Q4 Mfg Activity data.
Bloomberg Finance LP
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FOREX: USD - BBDXY dragged Below 1190 By The Bounce In The AUD
The BBDXY has had a range today of 1188.83 - 1191.78 in the Asia-Pac session; it is currently trading around 1189. Risk has had an impressive turnaround thanks to a very strong US ISM Man PMI. What's interesting about the USD price action is that recently this type of price action would have seen the USD give back most of its recent gains, but it continues to hold around 1190, the large bounce in the AUD is seeing it begin to pullback in Asia though. I suspect that bounces will continue to find sellers in the short-term as the USD still has few friends. On the day, the first resistance remains in the 1190-1195 area and then more importantly back towards 1200 where I suspect sellers would return in earnest.
- EUR/USD - Asian range 1.1787-1.1815, Asia is currently trading 1.1814. Price action has left an ugly bearish shadow on the weekly chart, but we are approaching levels that should start to see some buyers return. On the day, the support is between the 1.1760-1.1790 area initially a move through here would open up a deeper reversion back to the important 1.1700 area where I suspect buyers would again return. I suspect a bounce back toward the 1.1870-1.1910 area would find sellers first up as the pair looks to consolidate.
- GBP/USD - Asian range 1.3661-1.3691, Asia is currently dealing around 1.3691. The pair like everything else had an ugly weekly close leaving a clear rejection of the 1.3850 area. On the day, first support is 1.3600-1.3650 then the 1.3500 area.
- Cross asset : SPX +0.25%, Gold $4820, US 10-Year 4.28%, BBDXY 1189, Crude Oil $61.93
- Data/Events : Italy HCOB Italy New Car Registrations, Spain Unemployment Change, France CPI
Fig 1: GBP/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
GOLD: Gold Nears 20-day EMA, as Dip Buyers Emerge
- Gold snapped a three day losing streak, tracking back up towards its upper technical resistance Tuesday.
- Opening the day at US$4,661.45 following an overnight close -4.7% down, gold resumed its upward trend reaching $4,855.93 - above the 20-day EMA of $4,821.65, before falling back below and stabilizing around $4,820.20.
- Market chatter suggests dip buyers are behind the move as the USD moderates and positive momentum returns for the precious metal.
- Should gold retest and hold above the 20-day EMA, beyond that $5,000 is the next key level.
- Gold's rally comes as risk sentiment bounces across the region with key equity markets strong, and geo-political risk stabilizing for now.
JPY: USD/JPY - Treading Water On A 155 Handle
The USD/JPY range today has been 155.38 - 155.66 in the Asia-Pac session, it is currently trading around 155.50. USD/JPY has been doing some work between 154.50-156.00 as the USD continues to grind higher. CFTC data up until last Tuesday shows leveraged funds paring back large Yen shorts, this bounce back to 156 could provide decent levels to further reduce positioning for CTA/Momentum type players. In today's session, watch to see if these positions are further reduced into the 156.00 area. The juggernaut speed it was building to the topside looks to have been broken for now and we might need to consolidate and do some work before embarking on a clear trend again. What is clear though is that the price action had more to do with overextended positioning and after some consolidation the pressure against the Yen could be resumed at some point.
- “JAPAN ECONOMY MINISTER KIUCHI: THERE ARE PROS, CONS OF WEAK YEN, FX MOVES ARE DETERMINED BY VARIOUS FACTORS" RTRS
- "KATAYAMA: US, JAPAN WILL WORK IN LINE WITH FX JOINT STATEMENT. JAPAN, US WILL CONTINUE TO WORK CLOSELY ON FX. SHARE GENERAL VIEW ON FX WITH TAKAICHI" - BBG
- "JAPAN RULING LDP SET TO WIN MAJORITY IN LOWER HOUSE: KYODO POLL' - BBG
- Options : Close significant option expiries for NY cut, based on DTCC data: 155.75($876m), 158.50($442m). Upcoming Close Strikes : 153.00($1.59b Feb 5), 151.50($1.11b Feb 4) - BBG.
- The USD/JPY Average True Range(ATR) for the last 10 Trading days: 159 Points
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
