AUSSIE BONDS: Richer With US Tsys, Trump Tariff Talk Impact Was Fleeting
ACGBs (YM +5.0 & XM +6.5) are stronger and near Sydney session highs.
- Today’s move was all about US tsys. Cash US tsys are 6-9bps richer in today’s Asia-Pacific session, with a flattening bias, following yesterday’s holiday. The session has been marked by volatility, driven by reports that Trump suggested tariffs on Canada and Mexico might take effect on February 1. While gains were briefly pared, US tsys have since rebounded, trading near session bests.
- Cash ACGBs are 6bps richer with the AU-US 10-year yield differential at -13bps.
- Swap rates are 5bps lower.
- The bills strip has bull-flattened, with pricing flat to 54.
- RBA-dated OIS pricing is flat to 5bps softer across meetings today. A 25bp rate cut is more than fully priced for April (110%), with the probability of a February cut at 68% (based on an effective cash rate of 4.34%).
- The local calendar is light this week after key December labour market data last Thursday. The highlights are the Westpac Leading Index tomorrow and S&P Global PMIs (P) on Friday. The focus is now on Q4 CPI data released on Wednesday, January 29.
- The AOFM plans to sell A$800mn of the 2.75% 21 June 2035 bond tomorrow and A$700mn of the 1.50% 21 June 2031 bond on Friday.
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TRUDEAU SAYS `WE HAVE A LOT OF WORK TO DO'
- TRUDEAU SAYS `WE HAVE A LOT OF WORK TO DO'
- TRUDEAU WANTS GOVT TO PREPARE FOR NEW US ADMINISTRATION
- TRUDEAU DOESN'T ADDRESS QUESTIONS ABOUT HIS LEADERSHIP
USDCAD TECHS: A Pullback Would Be Considered Corrective
- RES 4: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 3: 1.4537 2.0% 10-dma envelope
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4356 @ 16:56 GMT Dec 20
- SUP 1: 1.4301 Low Dec 18
- SUP 2: 1.4174/4014 20- and 50-day EMA values
- SUP 3: 1.3928 Low Nov 25 and a key support
- SUP 4: 1.3822 Low Nov 6
USDCAD bulls remain in the driver’s seat. While price faded into the Thursday close, the recent breach of 1.4178, the Nov 26 high, confirmed a resumption of the uptrend and this maintains the price sequence of higher highs and higher lows. The latest rally opens 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4174, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Bearish Trend Structure
- RES 4: 0.6550 High Nov 25
- RES 3: 0.6501 50-day EMA
- RES 2: 0.6429 High Dec 12
- RES 1: 0.6337/6396 Low Dec 11 / 20-day EMA
- PRICE: 0.6263 @ 16:55 GMT Dec 20
- SUP 1: 0.6199 Low Dec 19
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
The trend needle in AUDUSD continues to point south and this week’s fresh cycle lows and Wednesday’s sell-off, reinforce a bear theme. The move down maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. The break lower opens 0.6158 next, a Fibonacci projection. Initial firm resistance to watch is 0.6396, the 20-day EMA.
