GOLD: US-Japan Trade Deal Boosts Risk Appetite Weighing On Gold

The AUD/USD has had a range of 0.6398 - 0.6449 in the Asia- Pac session, it is currently trading around 0.6405. The AUD has remained under pressure after gapping lower on the Asian open, -0.70%. The market is digesting the implications of a longer and more sustained US involvement in the conflict and how Iran might react to this, potentially blocking the Strait of Hormuz.

• AUSTRALIA DATA: Pickup In June Activity But Manufacturing Environment Difficult. The preliminary June S&P Global PMIs showed that services activity in Australia ended Q2 on a more positive note with the index up to 51.3 from 50.6. Manufacturing was stable at 51.0 as the global market becomes more challenging, which left the composite up to 51.2 from 50.5, the highest since March. The Q2 average composite PMI was 50.9 down slightly from Q1’s 51.1, signalling that growth was little changed and remained positive but lacklustre.
• "FITCH RATINGS: AUSTRALIAN MORTGAGE ARREARS SHOW SHARPER THAN EXPECTED RISE, AUSTRALIA MORTGAGE ARREARS RISE IN 1Q.”(BBG)
• The AUD/USD looks likely to have a look back towards its 0.6350/0.6400 support.
• Price remains in the wider 0.6350 - 0.6550 range for now. After failing to break higher, the focus will now turn to whether the support can hold, a close back below 0.6350 is needed to challenge the newly formed uptrend.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6510(AUD397m). Upcoming Close Strikes : 0.6500(AUD1.21b June 26), 0.6450(AUD553m June 26).
• CFTC Data shows Asset managers maintaining their shorts, the Leveraged community though have again added to their shorts.
• AUD/JPY - Today's range 93.85 - 94.38, it is trading currently around 94.00. Choppy price action as the pair establishes a range between 92.00 - 96.00. A break back below 91.50/92.00 is needed to see the move lower regain momentum and the focus turn back to the year's lows again. The move higher in oil and a market already very long JPY is preventing this pair moving lower in reaction to a souring risk backdrop for now.

Fig 1: AUD/USD spot Daily Chart

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

The TYU5 range has been 110-25+ to 111.04 during the Asia-Pacific session. It last changed hands at 110-27+, down 0-04 from the previous close.

• The US 2-year yield has edged higher trading around 3.916%, up 0.01 from its close.
• The US 10-year yield has bounced higher trading around 4.392%,  up 0.02 from its close.
• (Bloomberg) -- “Treasuries may benefit from demand for haven assets and concerns over an economic slowdown unless oil prices rise dramatically, according to Nomura Securities Co.”
• Lance Roberts on X: “While the Fed is quietly sitting on the hands as economic data slows and tariff inflation remains non-existent, other central banks are rapidly cutting rates with the Swiss restarting NIRP. The Fed is likely going to be too late once again adjusting monetary policy which is its history.”
• The 10-year yield continues to find decent supply back towards its 4.30/35% support, this area needs to hold if yields are to move higher. The range looks to be 4.30% - 4.60% for now a break either side would provide a clearer direction.
• Data/Events: S&P Global US PMI’s, Existing Home Sales

• China's bond futures have all moved lower in morning trade as major equity bourses are mixed.  
• The 10YR future is down -0.05 at 109.10, remaining above all major moving averages.  The nearest is the 20-day EMA of 108.98
• The 2YR future is down -0.02 at 102.52 and sits between the 100-day EMA of 102.61 and the 50-day EMA of 102.50
• Having closed Friday at 1.64% the 10YR CGB is at 1.63% this morning, lower by -0.5bp