AUSSIE 10-YEAR TECHS: (U5) Rolling Off Highs

TYM5 reopens at 110-18, up 0-03 from closing levels in today’s Asia-Pac session.

• Friday night US 10-year yields had a range of 4.4161% - 4.4676%, closing around 4.44%. 
• Treasury yields ended higher across the board overnight,  yield curves ended mixed(2s10s +0.45 at 50.12, 5s30s -0.68 at 95.86).
• US DATA: The ISM Manufacturing headline PMI reading unexpectedly fell to 48.5 in May (49.5 survey, 48.7 prior), leaving it in contractionary territory for a 4th month. As the survey put it, "contraction in most of the indexes that measure demand and output have slowed, while inputs have started to weaken". Tariffs cast a heavy shadow over this stagflationary report report, impacting everything from exports to prices paid.
• Despite soft-looking ISM Manufacturing and construction spending data this morning, the Atlanta Fed's GDPNow estimate for Q2 GDP growth picked up to 4.6% vs 3.8% Friday.
• The 10-year has bounced nicely off its support around 4.35/40%. Yields need to hold above this area to continue to build for a move higher. 

The AUD had a range overnight of 0.6455 - 0.6500, Asia is opening around 0.6490. The USD sell-off that began in Asia was extended overnight and the AUD and NZD have both been big beneficiaries as they both gain over 1%.

• Bloomberg - “Australia and Singapore bonds are getting a lift from rising questions about the appeal of Treasuries. A tumble in the value of the US dollar has also put pressure on investors across Asia to find alternatives.”
• Bloomberg - “ The pace of house price increases remains barely above inflation, and together with subdued turnover, suggests a housing market upswing isn't likely to worry the central bank just yet.”
• “Australian home prices rose for the fourth consecutive month, driven by interest rate cuts and expectations of further cuts later this year.”(BBG)
• The AUD bounced pretty hard against the USD overnight so If you want to express a short it looks best to do that in the crosses for now.
• Expect buyers to continue to be around on dips while the support in the AUD holds, a close back below 0.6300/50 would start to challenge the newly formed uptrend. 
• Price is back to testing the topside resistance, a sustained break above 0.6550 and the move higher could begin to accelerate.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6500(AUD764m), 0.6415(AUD672m). Upcoming Close Strikes : 0.6300(AUD 1.47b June 6)
• CFTC Data shows Asset managers pared back their shorts ever so slightly, the Leveraged community though added to their shorts quite aggressively over the week.
• Data/Event: RBA Minutes, BoP

• Fig 1: AUD/USD spot Daily Chart

  

  Source: MNI - Market News/Bloomberg

USD/CNH tracks near 7.2100 in early Tuesday dealings, with CNH losing modestly versus the USD for Monday's session. This underperformed broader USD softness, with both the BBDXY and DXY indices off around 0.60%. Spot USD/CNY finished up at 7.1989, while the CNY CFETS basket tracker finished up at 95.96, down 0.34%. 

• Weaker ISM data didn't help the USD, while continued US-China trade tensions also weighed, albeit helping drive yuan underperformance on crosses. CNH/JPY made fresh multi week lows under 19.7700.
• For USD/CNH spot current levels are very close to the 20-day EMA resistance point. Intra-session highs from Monday were at 7.2241. The 50-day EMA is further north, close to 7.2370. Lows from late May were near 7.1800.
• Focus remains firmly on US-China trade tensions. BBG noted overnight: “I can confirm that the two leaders will likely talk this week,” White House Press Secretary Karoline Leavitt told reporters on Monday. She did not provide a date for what she said was a “potential” call nor guarantee one would occur. " 
• This followed comments from the China MOFCOM on Monday that US actions (around chips export curbs and student visas) were violating the recent Geneva trade negotiations held earlier in May.
• Locally today we have the Caixin manufacturing PMI, projected at 50.7 by the market consensus versus 50.4 prior.