JGBS: Subdued Session Ahead Of Payrolls, Tariff Uncertainty Remains

NZGBs closed 1-2bps cheaper after a subdued session. There were 2bp ranges across the benchmarks. 

• Cash US tsys are little changed in today's Asia-Pac session. Wednesday's US data focus is on MBA Mortgage Applications at 0700ET, Challenger Jobs at 0730ET followed by ADP Employment Change at 0815ET. No Fed scheduled Fed speakers. Thursday is a heavy data day with NFP added due to Independence Day holiday closure on Friday.
• The NZ-US yield differential closed 2bps tighter on the day. At +25bps, the NZ-US 10-year differential is in the top half of the -20bp to +40bps range seen this year. 
• Swap rates closed 1-2bps higher, with the 2s10s curve steeper.
• RBNZ dated OIS pricing closed little changed across meetings. 4bps of easing is priced for July, with a cumulative 33bps by November 2025.
• Tomorrow, the local calendar will see Cotality Home Values, ANZ Commodity Prices and NZ Government 11-Month Financial Statements.
• The NZ Treasury launched a syndicated tap of the May 2031 nominal bond. Treasury expects to issue at least NZ$4bn and will cap it at NZ$6bn. Issue will be priced July 3 with initial price guidance +21-24 bps over the May 2030 nominal bond. The Treasury has cancelled the July 3 bond auction.

• RES 4: 1.1923 2.000 proj of the Feb 28 - Mar 18 - 27 price swing
• RES 3: 1.1868 2.0% 10-dma envelope
• RES 2: 1.1851 High Sep 10 2021 
• RES 1: 1.1829 High Jul 01
• PRICE: 1.1796 @ 05:56 BST Jul 2
• SUP 1: 1.1631 High Jun 12 and a recent breakout level
• SUP 2: 1.1578 20-day EMA
• SUP 3: 1.1446 Low Jun 19  
• SUP 4: 1.1405 50-day EMA

The trend needle in EURUSD continues to point north and the pair is holding on to its latest gains. The breach last week of 1.1631, the Jun 12 high and a bull trigger, confirmed a resumption of the uptrend. The 1.1800 handle has been pierced, sights are on 1.1851, the Sep 10 2021 high. Key short-term support to watch lies at 1.1578, the 20-day EMA. A clear break of this average is required to signal scope for a deeper retracement.

The BBDXY has had a range of 1188.23 - 1190.00 in the Asia-Pac session, it is currently trading around 1189. The USD has traded sideways today after initially trying lower. The larger picture remains one of USD weakness, short-term though price is beginning to look a little stretched and we could see more profit-taking heading into NFP. In the current environment rallies should continue to be met with supply, first resistance is back towards the 1205/1215 area.

• EUR/USD -  Asian range 1.1788 - 1.1810, Asia is currently trading 1.1800. While the USD remains on the back foot the EUR will continue to be supported, short-term it is starting to look stretched the first support is back towards 1.1500/1.1600. The medium term targets will now be towards 1.2000 and beyond.
• GBP/USD - Asian range 1.3732 - 1.3753, Asia is currently dealing around 1.3745.This move higher now looks to have broken convincingly higher and with the USD looking like it is set for another leg lower Cable could potentially now target levels back towards 1.4200. Short-term momentum seems to be stalling first support is back towards 1.3500/1.3600.
• USD/CNH - Asian range 7.1598 - 7.1662, the USD/CNY fix printed 7.1546 Asia is currently dealing around 7.1650. Sellers should be around on bounces while price holds below the 7.2500 area and the PBOC manages the fix lower.
• Cross asset : SPX +0.27%, Gold $3340, US 10-Year 4.25%, BBDXY 1189, Crude oil $65.50
• Data/Events : Italy Unemployment, France Budget Balance, EZ Unemployment, Spain Unemployment

Fig 1: EUR/USD Spot Daily Chart

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