US TSYS: Tsys Futures Head Higher On Strong 10Y Auction, FOMC & CPI Later Today
Jun-11 22:16
- Treasury futures continued to extend session highs after the bell, pausing after initial rebound rally following strong 10Y auction metrics - the first auction stop through in over 10 auctions. TU has opened Wednesday trading at 101-31¼ vs highs of 101-31⅞, while TY is trading at 109-17 vs overnight highs of 109-19.
- Treasuries sold off sharply last Friday and the contract remains soft for now. The sell-off undermines the recent bullish theme and also highlights a potential bearish reversal
- Looking at TYU4 technical levels, initial support is at 109-00+ (June 10 lows), with the 108-27+(Jun 3 lows) the next target. While to the upside initial resistance is at 109-15 (50-day EMA) above here we target 110-21 (June 7 highs).
- Cash treasury curve twist flattened on Tuesday with yields 4-18bps lower. The 2Y -4.5bp to 4.834%, the 10Y -6.3bps at 4.404% while the 2y10y was -1.662 at -43.212.
- Tsy $39B 10Y auction re-open (91282CQK3) stops 2.1bp through: 4.438% high yield vs. 4.459% WI; 2.67x bid-to-cover vs. 2.49x prior. Strong metrics: Indirect take-up climbs to 74.60% vs. 65.52% prior; direct bidder take-up falls to 13.81% from 18.74% prior; primary dealer take-up down to 11.59% vs. 15.73% prior.
- Looking ahead, CPI at 0830ET and FOMC policy announcement at 1400ET, Fed Chairman Powell presser at 1430ET.
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CNH: USD/CNH Close To 200-day MA Resistance, Weaker Credit Data To Fuel Easing Expectations
May-12 22:15
USD/CNH holds close to recent highs in early Monday dealings, the pair near 7.2340. We spent most of the Friday session tracking higher and sit near the 20 and 50-day EMAs. The simple 200-day MA is also around 7.2380. On the downside, the 100-day EMA is near 7.2250. Spot USD/CNY finished up at 7.2268.
- Broader USD sentiment was mildly firmer on Friday as US yields rose, amid firmer inflation expectations.
- We had data over the weekend on April inflation and credit/new loans data in China. Inflation was close to expectations (headline CPI +0.3% y/y, versus 0.2% forecast). See this link. Credit expansion was weaker than expected, with M2 slowing to a record low, see this link.
- This is likely to keep expectations around further policy support still firm from a sell-side standpoint. The FT reported that China has kicked off plans to sell longer dated bonds ($140bn) to support the economy.
- Note on Wednesday the 1yr MLF outcome is due, although no change is expected at this stage (currently 2.5%).
- The other focus point will be an expected tariff hike by the US Administration on certain China exports, including EVs. An announcement is expected this week (see this BBG link).
NZD: AUD/NZD Tests 20-Day EMA Support
May-12 22:03
- AUD/NZD was little changed on Friday, the cross tested support at 1.0960 (20-day EMA) before finishing the session at 1.0970, early Monday we trade up 0.08% at 1.0975. The 14-day RSI holds steady above 50 at 55, while the MACD indictor is neutral. A break below the 20-day EMA at 1.0960 would be needed to see a directional changed with 1.0900 (round number support/50-day EMA) the next support zone, while initial resistance is 1.1031 (May 7 high),
- The AU-NZ 2Y swap is up 2bps at -65bps.
- Option expiries: 1.0950 ($200.46m), 1.1100 (153.15m) May 13 NY cut.
- Looking ahead: NZ Performance Services Index, Food Prices & 2Yr Inflation Expectation and AU NAB Business Surveys
NZD: NZD/USD Holds Above 0.6000, Food Prices & 2yr Inflation Expectation Up Next
May-12 21:46
The Kiwi pushed drifted lower on Friday finishing the session down 0.24% at 0.6020. There session was relatively quiet with little in the way of local data or headlines while there was mixed messaging in the U. of Mich. Sentiment falling to 67.4 vs 76.2 est, from 77.2 in Apr, while headline sentiment missed expectations and pointed to a deteriorating consumer, the one-year inflation expectation metric rose to 3.5% from 3.2%, the highest since late 2023.
- The NZD/USD finished the Friday session towards the bottom of the daily range and spent most of the day trading within about 20-pips. The pair traded sideways the past week with the 100-day EMA acting as resistance, the 14-day RSI hovers above 50, while the MACD has started to print decreasing green bars. Early morning on Monday we trade down 0.05% at 0.6017.
- Key levels to watch: Initial resistance of 0.6044 (May 5 highs/100-day EMA) would be needed to test the of 0.6068 (200-day EMA), to the downside a clear break of 0.6000/6007 (round number support/ 50-day EMA) would open a move to 0.5981 (20-day EMA) and below here 0.5917 (May 2 lows).
- The US-NZ 2y is up 5bps to -13.5bps
- Option expiries: 0.5690 (NZD760m) while notable upcoming strikes are 0.5885 (NZD950m May 16), 0.5695 (NZD760m May 14), 0.5915 (NZD731.4m May 15)
- Looking ahead: Performance Services Index, Food Prices & 2Yr Inflation Expectation Today
