AUSSIE BONDS: Subdued Session Ahead Of The FOMC Decision

The BBDXY has had a range of 1201.04 - 1203.32 in the Asia-Pac session, it is currently trading around 1202, -0.05%. The USD drifted lower again going into the weekend back towards its support just below 1200. This is clearly the side the market is more comfortable trading. A sustained break below 1197/1195 is needed to regain the momentum lower and retest the year's lows.

• EUR/USD -  Asian range 1.1694 - 1.1716, Asia is currently trading 1.1705. The market moved very quickly back to 1.1700 where it stalled on its first attempt to challenge this area. The pair continues to consolidate around 1.1700 trying to build momentum to again move towards the year's highs.
• GBP/USD - Asian range 1.3549 - 1.3567, Asia is currently dealing around 1.3560. Having broken back above its pivot look for dips to again be supported, first support seen now back towards 1.3400/1.3500.
• USD/CNH - Asian range 7.1818-7.1891, the USD/CNY fix printed 7.1322, Asia is currently dealing around 7.1820. Sellers should be around on bounces while price holds below the 7.2200/2500 area and the PBOC manages the fix lower. Above 7.2500 and we could see a test of the USD Shorts.
• Cross asset : SPX +0.15%, Gold $3355, US 10-Year 4.305%, BBDXY 1202, Crude Oil $62.92
• Data/Events : Spain Trade Balance, EZ Trade Balance

Fig 1: BBDXY Spot 2H Chart

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

• RES 4: 130.26 High Aug 8
• RES 3: 129.97/130.06 50-day EMA / High Aug 14   
• RES 2: 129.72 20-day EMA
• RES 1: 128.98 Low Aug 12  
• PRICE: 128.81 @ 05:27 BST Aug 18
• SUP 1: 128.64 Low Aug 15 
• SUP 2: 128.40 Low Apr 9
• SUP 3: 128.19 Low Mar 27 (cont) 
• SUP 4: 127.83 76.4% retracement of the Mar 11 - Apr 7 bull leg (cont)  

Bund futures traded sharply lower Friday resulting in a breach of support at 128.84, the Jul 25 low and bear trigger. Note that the 129.00 handle marks the base of a broad range and a clear range breakout would strengthen a bearish threat. This would open 128.40 initially, the Apr 9 low. Strength above the 50-day EMA of 129.97, is required to signal a reversal. Resistance at the 20-day EMA is at 129.72.

ACGBs (YM -2.5 & XM -4.5) are weaker but off cheaps on a data-light session.

• (Bloomberg) “Some 42% of respondents named US tariffs as their top concern compared with 37% who cited the strategic threat from China, according to a Newspoll published Monday in The Australian. A further 21% said neither bothered them, the survey conducted Aug. 11-14 for the newspaper showed.”
• Cash US tsys are 1-2bps richer in today's Asia-Pac session. This week's US calendar includes residential sector data (housing starts, homebuilder sentiment, existing home sales) and flash August PMI data as well as a few Fed speakers (notably Waller and Bowman) ahead of Friday's keynote speech by Fed Chair Powell as part of the annual Jackson Hole symposium Aug 21-23.
• Cash ACGBs are 3-4bps with the AU-US 10-year yield differential at -4bps.
• The bills are -1 to -3, with the strip steeper.
• RBA-dated OIS pricing is slightly firmer across meetings today. A 25bp rate cut in September is given a 28% probability, with a cumulative 36bps of easing priced by year-end.
• Tomorrow, the local calendar will see Westpac Consumer Confidence.
• This week, the AOFM plans to sell A$1500mn of the 1.25% 21 May 2032 bond on Wednesday and A$300mn of the 4.75% 21 June 2054 bond on Friday.