AUSSIE 10-YEAR TECHS: (U5) Recovers From Its Recent Lows

• RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
• RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
• RES 1: 95.960 - High Apr 7
• PRICE: 95.765 @ 17:01 BST Aug 4
• SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14  
• SUP 2: 95.275 - Low Nov 14  (cont) and a key support
• SUP 3: 94.707 - 1.0% 10-dma envelope

Aussie 10-yr futures traded under pressure for much of last week, keeping prices subdued into Friday’s NFP print. The subsequent US 10y rally dragged Aussie 10-year futures with it, putting prices toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition. 

The AUD/USD had a range overnight of 0.6459-0.6490, Asia is trading around 0.6470. US Yields slipped lower again, but stocks came roaring back and the USD went nowhere. The AUD bounced nicely off the 0.6400 area but I suspect sellers might return back towards 0.6500/50 initially, though the bounce in equities overnight might suggest the correction I was looking for might not be as imminent as first thought.

• AUSTRALIA: June Consumption Growth Forecast To Rise. In a week of second tier data, the focus is likely to be on todays June household spending data which will now replace retail sales, which had its last print last week. The Q2 chain volume measure is also out. Bloomberg consensus expects June consumption values to rise 0.8% m/m to be up 4.9% y/y after 4.2% in May. The ABS noted that discounting in the month had boosted June retail sales.
• Bloomberg - “Australia looks likely to avoid a major direct blow from US tariffs. But indirect impacts - through weaker demand from trading partners and lower confidence - will be a key focus for policymakers. The degree of easing by the Reserve Bank will determine the success of a transition to private-demand-led growth. We expect it to deliver another 50 basis points of rate cuts in 2025 and more in 2026.”
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6550(AUD831m), 0.6600(AUD847m). Upcoming Close Strikes : 0.6500(AUD4.16b Aug 8), 0.6600(AUD1.97b Aug 7), 0.6800(AUD1.72b Aug 7) - BBG
• CFTC Data shows Asset managers reduced their shorts slightly -49183(Last -53959), the Leveraged community added to their own shorts -13997(Last -12010).
• Data/Event: S&P Global PMI, ANZ - Indeed Job Ads, Household Spending

Fig 1: AUD/USD spot Daily Chart

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

TYU5 reopens at 112-12, unchanged from closing levels in today’s Asia-Pac session.

• Overnight the US 10-year yield had a range of 4.1904% - 4.2552%, closing around 4.192%. 
• Treasury yields extended lower overnight; led by the long-end causing the yield curve to flatten (2s10s -1.50 at 51.508, 5s30s -1.09 at 105.235).
• MNI US Employment Insight: Sept FOMC In Focus As Jobs Stall. The weak payrolls report dominated what had been a decent-sized hawkish reaction from a patient Fed Chair Powell not giving a nod to a September rate cut at Wednesday’s FOMC press conference. We caution however that whilst jobs growth has soured sharply, it’s doing so along with a significant slowing in labor supply under immigration curbs.
• Bloomberg - “The Fed may need more than two rate cuts this year, Mary Daly told Reuters. “I was willing to wait another cycle, but I can’t wait forever,” she said.”
• The 10-year yield had a powerful move lower in reaction to the NFP data, breaking below its 4.30% pivot within the wider range 4.10% - 4.65%. This now turns momentum lower in yields and you could expect buyers of treasuries on bounces back towards 4.30/35% now looking to initially test the 4.10% area.