JGBS: Twist-Flattener As 30YY Extends Post-Supply Decline, Dec Hike At 89%

The NZD/USD had a range of 0.5631 - 0.5659 in the Asia-Pac session, going into the London open trading around 0.5655, +0.20%. The NZD has actually drifted higher in our session, this after a poor NZ Unemployment print and Asian stocks collapsing. This price action potentially points to the market already being positioned short, though some decent option expiries that are close could also be playing a part. The NZD stands out as a vehicle to short against a resurgent USD but it is worth noting that because of the size of the market it can very quickly become all positioned the same way. I think the USD will need to do the heavy lifting and break above its pivotal resistance for the NZD to test the 0.5500 lows. Should this correction in risk have more room to move lower then I suspect the NZD will remain a sell on rallies with the first resistance back toward the 0.5725-0.5750 area.

• MNI BRIEF: New Zealand Unemployment 5.3% In Q3. The underutilisation rate edged up to 12.9% from 12.8%, while the employment rate eased to 66.6% from 66.8%. The Reserve Bank of New Zealand expects unemployment to reach 5.2% by December.
• “RBNZ GOVERNOR HAWKESBY: HOUSE PRICES AND CREDIT GROWTH NOT RAISING RED FLAGS, SO CAN HAVE MORE BASELINE MORTGAGE LOAN-TO-VALUE RATIO SETTINGS" - RTRS
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5650(NZD1.1.4b Nov 5), 0.5675(NZD1.27b Nov 5), 0.5750(NZD604m Nov 5). Upcoming Close Strikes : 0.5730(NZD496m Nov 6), 0.5780(NZD305m Nov 6) - BBG
• Tomorrow, the local calendar will see the RBNZ at the Select Committee to discuss the FinStab Report, and the Government will release its 3-Month Financial Statements.

Fig 1: NZD/USD Spot Daily Chart

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

The USD/JPY range today has been 152.96 - 153.75 in the Asia-Pac session, it is currently trading around 153.45, -0.15%. The pair has pulled back from the 154/155 area as the Yen gets bought heavily in the crosses on the back of the pullback in risk, the collapse in Asian stocks today added to its headwinds. While this backdrop plays out I suspect the resistance around the 154/155 area should continue to offer solid resistance. Look for dips to continue to be supported while above 149-150, first support is toward the 151.50/152.00 area and then the more important 149.00-150.00 level.

• MNI: BOJ Minutes: More Than Two Members Positive On Hike. One Bank of Japan board member, apart from the two who proposed raising the policy rate to 0.75%, said it was time to consider another increase as more than six months had passed since the last hike, minutes of the Sept 18-19 meeting showed Wednesday.
• However, the member noted that uncertainty remained over the pace of the U.S. economic slowdown and said it was appropriate for the Bank to maintain its current policy stance for the time being.
• Options : Close significant option expiries for NY cut, based on DTCC data: 150.65($450m). Upcoming Close Strikes : 155.00($1.81b Nov 6), 155.35($1.38b Nov 6) - BBG.

Fig 1 : USD/JPY Spot Daily Chart

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

The AUD/USD has had a range today of 0.6459 - 0.6494 in the Asia- Pac session, it is currently trading around 0.6490, -0.02%. Asian stocks did not like how risk ended overnight and collapsed from the open keeping risk under pressure for most of our session. The AUD/USD fell away and the move gathered pace when it broke below the overnight lows, the panic has died down as we come into the afternoon session and some of these losses are being pared back. The AUD found some decent demand back toward its first support around 0.6450, though I suspect if this correction in risk has more to play out the AUD should now find sellers on a bounce back toward 0.6550 initially.

• The USD is starting to gain real momentum and the AUD has lagged this move helping it outperform in the crosses, should the support area around 0.6450 and then more importantly 0.6350 give way it could play catch up to the wider move.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6700(AUD 462m). Upcoming Close Strikes : 0.6500(AUD971m Nov 7), 0.6600(AUD560m Nov 6), 0.6600(AUD682m Nov 7) - BBG

Fig 1: AUD/USD spot Daily Chart

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