NEW ZEALAND: Signs Labour Market Stabilising

• RES 3: 147.74 - High Jan 15 and bull trigger (cont)
• RES 2: 146.53 - High Aug 6 
• RES 1: 142.40 - High Apr 3
• PRICE: 141.54 @ 16:47 GMT Apr 04
• SUP 1: 136.67 - 1.0% 10-dma envelope
• SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg   
• SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg

JGBs are extending the strong bullish reversal, rejecting any test of fresh cycle lows for the M5 contract. This defies the bearish momentum studies drawn on the longer-term chart, clearing moving-average resistance to print 142.40 at the new upper level. To the downside, sights are on 136.57, a Fibonacci projection. 144.48 is the medium-term target on any recovery.

The market has started to realise this is not just a US problem and a US recession has serious implications for global growth. Volatility is surging with the VIX ending last week at its highest level since 2020 around 45. China investors are bracing for a tough start to the week with a gauge of US-listed Chinese stocks falling 8.9% on Friday. The news China’s 34% retaliation will be front and center for Asia this morning, and already risk has taken another leg lower as the market fears escalation.

• US 10yr yields got to just below 3.86% on Friday night but closed back towards 4%. This morning as risk takes another leg lower on this news US yields are once more testing their lows in the futures implying more volatility on the open.
• USD/JPY pretty much followed US yields and when the 10Yr moved back towards 4% USD/JPY had a decent bounce back to 147.50 closing around 147.00. 
• The gap lower this morning in risk has seen USD/JPY move very quickly back to its lows around 145.00. The JPY is a favourite to own in times of extreme stress and while this market stays under pressure there will be good buyers of JPY.
• Traders will be looking to sell into any rally again today. Anything on a 147/148 handle will be taken advantage of as the direction seems clear for now and the initial target would be a retest of the 140.00 support zone.
• Should we see another leg lower in risk today, USD/JPY will continue to gather pace lower and sellers will be forced to come to market.
• Key pivotal support lies around 140.00, a break of this area would really set the cat amongst the pigeons and open a quick move back to the 1.25/1.30 area.
• Japan's Feb Leading and Coincident index out today.

Source: MNI - Market News/Bloomberg

The market has started to realise this is not just a US problem and a US recession has serious implications for global growth. This has seen the USD return as a safe haven and risk proxy currencies like the AUD and NZD be particularly hard hit as the right hand side of the USD smile comes into play. A raft of Asian currencies have reached out to the US looking to remove either levies on US imports or open trade talks. China though unveiled a 34% duty on all US imports and this will be front centre as the market attempts to digest the implications of this in the Asian session.

• A huge range Friday 0.5552 - 0.5803, as the market went from selling USD’s thinking this would be US centric, but as global markets have all reacted violently lower so the USD has again been sought out as a safe haven.
• Technically the NZD continues to hold the 0.5500 support area, but price has moved quickly from looking like it was forming a base to again testing this pivotal support.
• This area has held 3 times going back to 2020, a break could start to see this move accelerate and the risk is it mirrors the move seen in the AUD on Friday and we have a gap lower in very thin liquidity. 
• The CFTC data show both leverage funds and asset managers are running historically large short positions, if risk continues to melt down, expect these to be added to.
• A huge move  lower in AUD/NZD on Friday as stale thematic longs are liquidated, this would have added to the selling pressure in the AUD on Friday night.
• On the day expect sellers to sell into any bounce back towards 0.5650/0.5700. All eyes though will be watching the key 0.5500 area for signs it might give way..
• RBNZ rate decision on Wednesday.