NEW ZEALAND: PMI Bounces Strongly In July, Back In Expansion Territory

The NZD/USD had a range overnight of 0.5939 - 0.6006, Asia is trading around 0.5945. The USD has surged higher on the back of the US CPI showing clear signs that tariffs are beginning to impact the core goods data. US yields and the USD have both reacted as the market further reduces rate cut expectations for the year. Risk is opening on the backfoot this morning, E-Mini -0.20%, NQ -0.20%. NZD/USD has broken below its recent support just below 0.6000 and the price action now suggests we could have a look back towards the important 0.5850 support area. Look for supply now on bounces back towards 0.6000 to cap initially.

• NZ Milk Prices Rise At Auction For The First Time Since May : Overnight the fortnightly whole milk powder auction saw prices rise 1.7% versus the previous auction result, per GDT. This put prices back to $3928, from $3859 prior.
• (Bloomberg) -- “New Zealand's 2Q CPI Uptick Won't Prevent Further RBNZ Rate Cuts. There's upside risk to our forecast for a softer 2Q inflation reading in New Zealand. The uptick in inflation should be short-lived, and won't prevent the RBNZ from delivering more support for growth with further reductions in the official cash rate.” 
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6000(NZD382m). Upcoming Close Strikes : 0.5932(NZD317m July18). - BBG
• CFTC Data shows Asset Managers added slightly to their newly built longs in NZD +9229, the Leveraged community added slightly to their shorts last week -8654.
• Data/Event : Non Resident Bond Holdings

Fig 1: NZD/USD Spot Daily Chart

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

The AUD/USD had a range overnight of 0.6508- 0.6576, Asia is trading around 0.6515. The USD has surged higher on the back of the US CPI showing clear signs that tariffs are beginning to impact the core goods data. US yields and the USD have both reacted as the market further reduces rate cut expectations for the year. This has seen currencies take a hit across the board, the AUD/USD has fallen quickly back to the lower end of its recent 0.6500/0.6600 range, its fortunes clearly tethered to the USD and if it can continue to pressure a short market then the AUD/USD could probe its support just below 0.6500. A Sustained break through this level opens up the potential for a further pullback towards the 0.6350 area.

• (Bloomberg) -- China and Australia agreed to enhance exchanges and cooperation, uphold their respective national interests and navigate differences wisely, according to a joint statement released by the Chinese foreign ministry.
• “The slowdown of China's GDP growth in the second quarter was relatively mild but the details raise concern about the outlook. Policymakers can’t let their guard down. Downside risks are high. The economy appears unable to walk without a policy crutch. Without additional support later in the year, growth could take another lurch down.” - BBG
• The AUD/USD continues to hold above its support around 0.6500, it will continue to take its cues from the USD. The price action after US CPI suggests a test of this support.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6550(AUD452m), 0.6575(AUD670m). Upcoming Close Strikes : 0.6480(AUD786m July18), 0.6500(AUD639m July 21), 0.6600(AUD725m July 21)
• CFTC Data shows Asset managers added to their shorts slightly -38252, the Leveraged community pared back their shorts to -19061.

Fig 1: AUD/USD spot Hourly Chart

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

• 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: 95.545 @ 16:09 BST Jul 15
• SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14  
• SUP 2: 95.275 - Low Nov 14  (cont) and a key support
• SUP 3: 94.707 - 1.0% 10-dma envelope

Aussie 10-yr futures traded under pressure for much of last week, keeping prices pressured and within range of the recent pullback lows. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition. To the upside, a recovery of recent losses would shift attention to resistance at 96.207, a Fibonacci retracement point.