ASIA: Tech Currencies Hurt; Others Benefit from USD Slip

TYZ6 is dealing at 105-26+, -0-11 from closing levels in today's Asia-Pac session.

• Cash bonds are 2-3bps cheaper in today’s Asia-Pac session after finishing Monday's session showing a modest twist-flattener. Benchmark yields closed 4bps higher to 1bp lower yesterday.
• Yesterday, the 10-year yield breached the 5% mark briefly before closing at 4.9875%. It is currently 3bps cheaper at 5.0163%.
• Rising energy costs have strengthened bets on a Federal Reserve interest-rate hike
• MNI FED: Sep 2026 FOMC Analyst Views: Split Between 1 And 2 Hike Dot For 2026 - From our updated Fed Preview Here: Consensus has capitulated in the direction of a 25bp September FOMC hike since last week's inflation data, with only a handful of analysts seeing the Fed staying on hold this week and even then mostly with weak conviction.
• MNI INTERVIEW: Lewis The Federal Reserve will likely take benchmark interest rates 75 basis point higher over the coming months before pausing, former senior Fed adviser Kurt Lewis told MNI. Lewis, who changed his own September FOMC call to a hike after the August CPI report nudged the case over the threshold, said he expects the committee to raise rates three times as long as inflation continues moderating slowly, with tariff effects fading and second-round effects from the oil shock absent.

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The BBDXY has had a range today of 1194.35 - 1196.57 in the Asia-Pac session; it is currently trading around 1196, +0.15%. The US Dollar’s rebound stalled around 1197 overnight as risk stabilised in the New York session but Asia has not been able to build on that reprieve. An Oil price above $100 for a significant length of time could have severe repercussions all across the globe and risk is starting to show the first signs of cracks appearing. The US Dollar attempted to play catch up overnight to a move that it has been lagging but with the FOMC this week I suspect it's a big ask for any sustained breakout ahead of that. There is strong resistance back toward the 1197-1202 area now and only a sustained break back above 1205 would have me thinking we could potentially see the USD reverse and turn higher again. Warsh should follow through and hike but will there be any hawkish guidance ? If not, does the US Dollar just come back under pressure ? 

• EUR/USD -  Asian range 1.1535-1.1553, Asia is currently trading 1.1535. The pair extended lower yesterday before finding some demand return just ahead of the 1.1500 area. The FOMC and any guidance from Warsh will now be pivotal for which way the US Dollar trades from here. I have been skewed in favour of fading this rally in the EUR, with this pivotal weekly 1.1600 area back in play, how far this bounce in the US Dollar goes will be key. If you are a EUR bear there is now a clear point back above 1.1700 where you are wrong. I suspect that we might continue to do some work albeit with an offered tone until the market sees what Warsh dishes up this week, with 1.1500-1.1650 likely to cover it until then.  
• GBP/USD - Asian range 1.3484-1.3505, Asia is currently dealing around 1.3484. The pair is back testing its first support which was held at the first time of asking. The support is seen toward 1.3450 but the pair is trading with a heavy tone as the US dollar attempts to bounce. The USD is belatedly catching a bid as risk struggles, can it play catch-up to push the GBP back below 1.3450.  
• Data: UK July Weekly Earnings, Unemployment Rate, France Aug. CPI (F), Spain Aug. CPI (F), Germany Sept. ZEW Survey Expectations

Fig 1: EUR/USD Spot Weekly Chart

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

The NZD/USD had a range today of 0.5752-0.5783 in the Asia-Pac session; it is currently trading around 0.5755. The pair has traded heavily again today moving back below the overnight low. On the day, the pair continues to trade with an offered tone and is a clear favorite to express a short. I suspect it might need the US Dollar to actually turn higher for it to sustain a challenge below the 0.5700-0.5750 area though, it's a tough ask ahead of the FOMC. A sustained break below here and the picture starts to look very different with another test of the 0.5500-0.5600 lows potentially on the cards. 

• MNI - NZ Consumer Remains Missing Piece Of Recovery In Q3: NZ’s monthly card spending data are volatile and so it’s unsurprising August saw payback for July’s strength. However, the annual growth rate moderated and the 3-month average momentum turned negative. Through the volatility, spending remains soft in line with lacklustre confidence and consistent with the RBNZ’s caution regarding future tightening and its thoughts on pausing to assess the impact of the previous 50bp of hikes in Q3.
• MNI - NZ  NEW ZEALAND: Polls Signal Two Blocks Very Close, High Risk Of Hung Parliament. BNZ said in August performance of services report that there is “more ground to make up before we can call this a solid turnaround” and that price pressures, rates and election uncertainty are at the fore for many services firms. The RBNZ said that firms are telling it that they are getting on with business despite elevated uncertainty around the 7 November election result. The average of opinion polls are signalling a high probability of a hung parliament with the latest from The Post/Freshwater implying the incumbent coalition with 60 of the 120 seats.
• Options : Closest significant option expiries for NY cut, based on DTCC data:  none. Upcoming Close Strikes : 0.5700(NZD553m Sept 18), 0.5855(NZD757m Sept 17) - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 46 Points

Fig 1: NZD/USD Spot Daily Chart

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