AUSSIE 10-YEAR TECHS: (U5) Follows Fade in Treasuries

TYU5 reopens at 111-10, down 0-03 from closing levels in today’s Asia-Pac session.

• Overnight the US 10-year yield had a range of 4.3262% - 4.3957%, closing around 4.344%. 
• Treasury yields ended broadly lower overnight; small adjustments in the yields curve(2s10s -0.44 at 50.851, 5s30s +0.59 at 103.047).
• MNI US: Trump Downplays Removing Powell, To Decide On Xi Meeting "Pretty Soon". Asked if he believes Powell should resign: “I think he’s doing a bad job, but he’s going to be out pretty soon anyway. In eight months, he’ll be out. I call him ‘too late’, he’s too late all the time. He should have lowered interest rates many times.”
• MNI US DATA: Redbook Retail Sales Maintain Steady Growth In Early Q3. The Johnson Redbook Retail Sales Index continues to post solid gains, rising 5.1% Y/Y in the week ending Jul 19, fairly steady compared with 5.2% the prior week.
• (Bloomberg) --Bullish Bond-Option Bets Build as Angst Around Powell Subsides. Speculation that President Donald Trump will eventually tap a dovish successor to Federal Reserve Chair Jerome Powell is feeding into a bullish tilt in Treasury options.
• The 10-year yield has moved back towards its pivot within the wider range 4.10% - 4.65%, expect supply around 4.30/35% first up. A close back below 4.30% would begin to get the bulls excited once more and the chopfest within the range will continue.

Fig 1: 10-Year US Yield 120min Chart

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

The AUD/USD had a range overnight of 0.6504- 0.6558, Asia is trading around 0.6550. The pair pushed higher in the New York session as the USD came back under renewed pressure with US yields pushing lower. The follow through below 0.6500 was quite disappointing for AUD shorts but with Stocks making new highs and risk outperforming, it makes it a hard environment for AUD/USD to collapse in. The pair looks to be consolidating in a 0.6450 - 0.6600 range as the market awaits a catalyst to provide clearer direction.

• (Bloomberg) - “The all-important quarterly data on inflation(for the 3 months to June) will be available next week, and a surprise uptick has the potential to spur an unwind of the August rate cut that markets have fully priced in. Of course, signs of inflation mellowing will almost certainly confirm another rate cut.”
• MNI US-CHINA: Swedish PM Confirms Stockholm Trade Talks 28-29 July. Swedish PM Ulf Kristersson has formally confirmed that US and Chinese delegations will meet in Stockholm on Monday 28 and Tuesday 29 July for talks aimed at reaching an agreement on trade and tariffs.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6525(AUD603m), 0.6500(AUD445m), 0.6580(AUD403m) . Upcoming Close Strikes : none - BBG
• CFTC Data shows Asset managers have maintained their shorts -38267, the Leveraged community added slightly to their shorts to -20048.
• Data/Event: RBA Minutes

Fig 1: AUD/USD spot 120min Chart

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

USD/CNH was little changed in Tuesday trade, with the pair tracking near 7.1700 in early Wednesday dealings. Tuesday's range was close to 7.1800 on the topside, while a late dip under 7.1700 drew some support. Broader USD sentiment was softer, with the BBDXY losing a further 0.40%, while the DXY fell by close to 0.50%. Spot USD/CNY finished up at 7.1690, while the CNY CFETS basket tracker fell by 0.24% to 95.87, as the yuan underperformed renewed USD weakness.

• For spot USD/CNH recent ranges continue to prevail amid a very low backdrop. The 50-day EMA resistance point remains intact on the topside, last around 7.1900. Earlier July lows near 7.1500 will be a focus point on the downside.
• An extension lower for US yields appears to have assisted the USD move on Tuesday, helped by Treasury Secretary Bessent providing a more optimistic tone regarding Powell’s short-term future as the Fed Chair.
• US-CH yield differentials continue to track lower, but for the 2yr and 10yr tenors we are above late June lows. The 10yr spread is around +265bps.
• Equity sentiment remains positive for China, with the CSI 300 closing near 4119, fresh highs back to Nov last year. In US trade, the Golden Dragon index gained +1.7%. We continue to see the China to global equity ratio firm, but this isn't providing much positive impetus to CNH.
• "US Treasury Secretary Scott Bessent said he will meet his Chinese counterparts in Stockholm next week for their third round of trade talks aimed at extending a tariff truce and widening the discussions." (per BBG, see this link).
• The local data calendar is empty today.