AUSSIE BONDS: Slightly Cheaper After A Subdued Data-Light Session

US treasury futures were mostly lower along with bond yields in a disjointed, post holiday market.  The 10-Yr bond future TYZ5 is down -03 at 112-30, in touch with the 20-day EMA.  A break lower could bring the 50-day EMA of 112-26+ into focus.  

Cash's morning rally moderated somewhat in the afternoon, but remains a very strong day with bond yields lower across the curve.  

• The 2-Yr is at 3.56% (-3.3bps)
• The 5-Yr is at 3.673% (-4.2bps)
• The 10-yr is at 4.083% (-3.5bps)
• The 30-Yr is at 4.683% (-2.3bps)

FED speakers dominate tonight with Williams, Paulson, Waller, Bostic, Miran and Collins all speaking throughout Wednesday, whilst economic data remains on hold.  

Investors will focus on the US$42bn 10-Yr issuance as the next guide for market demand, with markets remaining fixated on the US shutdown outcome.

The BBDXY has had a range today of 1217.77 - 1219.65 in the Asia-Pac session; it is currently trading around 1219, +0.15%.The USD has retraced most of its move lower from overnight in reaction to a weaker ADP print. I am caught a little undecided on the USD at the moment, I liked the fade into 1230 initially but short term I expect dips back toward 1210-1215 to now be supported first up. We could chop around sideways for a while while the market decides which way to go. Above 1230 and we could start to break higher, below 1205 and the downtrends momentum could be re-engaged. Short-term while the 12221/22 area caps price my bias would be for a test toward the 1210-1215 support, above there and the market will look back toward the 1230 area once again.

• EUR/USD -  Asian range 1.1571 - 1.1587, Asia is currently trading 1.1572. The pair continued to build on its support below 1.1500, I suspect rallies will now find sellers toward the 1.1650 area initially. This 1.1650-1.1700 area has been the pivot within the larger 1.1400-1.1900 range over the past few months. On the day a move back below 1.1530-1.1540 needed to turn lower again.
• GBP/USD - Asian range 1.3130 - 1.3164, Asia is currently dealing around 1.3130. The pair is trading sideways consolidating on a 1.31 handle. I continue to favor fading rallies though as GBP looks to have put in a medium term top. I suspect the 1.3250-1.3300 area is the place to fade if we see that level again. 
• Cross asset : SPX +0.15%, Gold $4110, US 10-Year 4.08%, BBDXY 1219, Crude Oil $60.85
• Data/Events : Germany Wholesale Price Index/CPI/Current Account Balance, Italy Industrial Production,

Fig 1: EUR/USD Spot Daily Chart

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

Gold reached a high of $4145.50/oz early in today’s APAC session but was then pressured by the strengthening of the US dollar (BBDXY +0.1%) and higher US equity futures (S&P e-mini +0.1%) after several days of gains. Bullion is now down 0.4% to $4108.7, after an intraday low at $4103.75. The market is watching US developments closely with a vote in the House of Reps to end the government shutdown due on Wednesday. How the delayed data print will impact the outlook for the Fed.

• The market is waiting for more information with around 17bp of easing priced in for the 10 December FOMC meeting and a full cut by January. Fed comments since the last decision have added uncertainty. There is a range of members speaking today. ADP data on Tuesday signalled labour market weakness.
• Our US analysts believe that the post-shutdown data schedule should be published next week with a risk that October CPI won’t be released. See their FAQ here.
• Silver is down 0.3% to $51.07 after falling to $50.873.
• Equities are mixed with the CSI 300 down 0.4% but the KOSPI up 0.7%. Oil prices are lower with WTI -0.3% to $60.85/bbl. Copper is down 0.3%.
• Later the Fed’s Barr, Williams, Paulson, Waller, Bostic, Miran and Collins speak as well as the ECB’s Schnabel and de Guindos. The Eurogroup meeting is taking place. There are no data of note.