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

The AUD/USD had a range overnight of 0.6450-0.6479, Asia is trading around 0.6470. US Equities slipped lower as the ISM services pointed to potential stagflation,  the USD tried to bounce but could not get any momentum and fell back to where it started the day. The AUD bounced nicely off the 0.6400 area but I suspect sellers might return back towards 0.6500/50 initially, I feel the performance of US equities over the next August/September will be crucial as seasonality points to some strong headwinds approaching.

• (Bloomberg)- The services ISM exemplifies the Fed conundrum in a nutshell: The headline was weaker than expected, employment was the lowest since March, but prices paid was the highest since October 2022. It’s essentially a stagflationary outcome, which is after all what economists have projected the net impact of tariff policy to be.
• MNI US: GOP Study Ctte To Meet Wednesday To Discuss Second Big Beautiful Bill. The House Republican Study Committee will host GOP staff on Wednesday for a discussion on crafting a second megabill, according to an invite seen by Politico
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6575(AUD701m). Upcoming Close Strikes : 0.6500(AUD4.27b 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: 

Fig 1: AUD/USD spot Daily Chart

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

TYU5 reopens at 112-06+, down 0-03 from closing levels in today’s Asia-Pac session.

• Overnight the US 10-year yield had a range of 4.1865% - 4.2237%, closing around 4.21%. 
• Treasury yields were mixed overnight; the front-end saw yields bounce causing the yield curve to flatten (2s10s -3.14 at 48.368, 5s30s -5.16 at 100.076).
• MNI US DATA: ISM Services Points To Stagflationary Developments Amid Tariffs. July's ISM Services data were more "stagflationary" than anticipated, with a dip in activity amid a pickup in price pressures. The report overall suggests that firms' tariff-related concerns linger, with momentum failing to build on a brief improvement in June. Combined with the headline index, the subcomponents of the survey show a clear slowing in activity since late 2024.
• Bloomberg - “Three-Year Auction Tails on Weak Investor Demand. The first auction of the new quarterly refunding was a little mediocre. Despite a reasonable morning concession, the offering tailed by 0.7 bps, stopping at 3.669%. Demand was tepid at best, with bid/cover of 2.53 more than 0.5σ below the one-year average.”
• 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. 

Fig 1: 10-Year US Yield 120min Chart

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