FED: Reserves Tick Up Slightly In Latest Week, But Still Near "Ample" (1/2)

The NZD/USD had a range overnight of 0.5737 - 0.5788, Asia is trading around 0.5785. US equities cannot be kept down and surged to new highs again regaining momentum after they looked to have stalled. The USD did really react to this, consolidating its recent gains. After falling over 1% on the surprise RBNZ cut, the NZD found strong demand just below the 0.5750 area and has bounced overnight as risk looks to regain its momentum higher. That does look like an ugly shadow on the Daily chart but I suspect rallies will continue to be faded while we remain below 0.5850. The NZD remains one of the stand out vehicles to express a short, again you just have to decide what against. 

• MNI RBNZ WATCH: MPC Strengthens Easing Bias With 50bp Cut. The RBNZ will closely watch the Q3 CPI, due Oct 20, which it expects at 3.0%, and the Q3 labour market report on Nov 5, which the August statement forecast to show a 5.3% unemployment rate, ahead of its next and last meeting for 2025. 
• Bloomberg reports banks are lowering their expected cash rates in response to yesterday: “Some Economists Expect RBNZ Will Cut Cash Rate to 2% or Lower. Citi economists expect the OCR will fall as low as 1.75% in early 2026. JPMorgan economists expect the OCR will drop to 2% in February.”
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5850(NZD300m Oct 14) - BBG 

Fig 1: NZD/USD Spot Daily Chart

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

Given its usual relationship with the US dollar and Treasury yields, gold should have been subdued on Wednesday. The USD BBDXY rose 0.1% and the 2-year yield was slightly higher. Instead gold decisively breached $4000 reaching a high of $4059.31/oz and rose 1.4% on the day to $4042.03. The next level to watch is $4074.5, a Fibonacci projection. Political uncertainty in the US, France and Japan are driving safe-haven flows into precious metals.

• The US has been the major contributor to gold’s rally with the Fed resuming rate cuts and the September minutes signalling that most FOMC members expect more easing before year end.
• President Trump’s interference in the central bank with his attacks on Chair Powell and attempt to remove Governor Cook has also rattled markets. The ongoing government shutdown is the latest driver of bullion with no imminent end apparent and the subsequent delay in economic data clouding the economic picture.
• France’s President Macron is due to name a new PM by the end of the week but that is unlikely to solve the parliamentary impasse, especially on the budget.
• There has also received long-term support with increased central bank purchases of gold, especially from PBoC, which are expected to continue.
• Silver is up 2.2% to $48.887 after a high of $49.551, above round number support at $49.00, and is up 4.8% this month similar to gold’s +4.7%. Silver remains in an uptrend with the bull cycle extended this week and the next level to watch is the April 2011 record high at $49.804.

The AUD/USD had a range overnight of 0.6557-0.6587, Asia is trading around 0.6585. US equities cannot be kept down and surged to new highs again regaining momentum after it looked to have stalled. The USD did really react to this, consolidating its recent gains. The AUD drifted back toward the 0.6600 area but with no clear trend the range looks likely to continue. For choice the AUD still remains one of the better vehicles to express a long in, it's just what you choose to be long against. While AUD/USD remains below 0.6625/50 I suspect sellers will fade rallies first up, but a break above there would signal the upward trend could regain momentum and look to test the pivotal 0.6700 again.

• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6590(AUD365m). Upcoming Close Strikes : 0.6500(AUD1.01b Oct 14), 0.6600(AUD918m Oct 14) - BBG
• Data/Event: Consumer Inflation Expectation

Fig 1: AUD/USD spot 2H Chart

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