ASIA FX: USD/Asia Pairs Mostly Biased Lower, IDR Outperforms
The bias for most USD/Asia pairs has been skewed to the downside. Outside of USD/IDR, moves have been fairly modest though. The weekend focus will be on tomorrow's official China PMI prints, where expectations are mostly downbeat, while on Sunday December trade figures for South Korea print.
- USD/CNH has been supported sub 6.9700, but is attempting a move below this level. The CNY fixing was neutral. We expect the market to mostly look through tomorrow's PMI prints. An upside surprise would likely generate more of a market reaction than fresh downside momentum.
- 1 month USD/KRW has been range bound around the 1260 level, with onshore markets closed today. December CPI showed sticky core inflation pressures (4.8% y/y, versus 4.6% expected), which is likely to see the BoK raise rates (25bps) at the next policy meeting in mid January.
- USD/IDR is down a further 0.50% today in spot terms. The pair ended yesterday's session at 15658, but dipped as low as 15548 in early trade today before USD support emerged. We last tracked close to 15580. These moves follow BI intervention yesterday, which came after the pair rose to fresh 2yr highs. This puts USD/IDR back below its simple 50-day MA (15626), but not yet on an EMA basis (15559). The break below these support levels couldn't be sustained in early December.
- USD/THB is tracking to fresh lows, to levels last seen in the first half of June. The pair was last around 34.53. Signs of firmer domestic consumption is aiding the growth outlook (7.2% y/y for Nov), while net equity inflows were $244mn yesterday. A clean break sub 34.50 is likely to have the market targeting May lows around the 34.00 figure level.
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JGBS: Oscillating In Narrow Range
The broader bid in core global FI markets (fleshed out elsewhere) allowed JGBs to briefly firm during the Tokyo afternoon, before some weakness crept in ahead of the bell. Futures now print -7 ahead of the close, while cash JGBs are little changed to 1.5bp cheaper across the curve.
- That was after a sedate round of morning dealing saw a modest uptick in JGB yields, while JGB futures traded on the backfoot. This was perhaps a catch-up play to Tuesday’s cheapening in U.S. Tsys.
- Softer than expected domestic industrial production data failed to inspire price action.
- Broader domestic headline flow was limited at best, with no meaningful market reaction to news of a brief joint incursion by Russian & Chinese military aircraft into Japanese airspace.
- Looking ahead, Thursday’s local docket includes capex & final manufacturing PMI data and 10-Year JGB supply. We will also hear from BoJ’s Noguchi.
EURUSD TECHS: Trading Below Monday’s High
- RES 4: 1.0615 High Jun 27
- RES 3: 1.0559 1.764 proj of the Sep 28 - Oct 4 - 13 price swing
- RES 2: 1.0536 High Nov 24 / Jun 29
- RES 1: 1.0497 High Nov 28 and the bull trigger
- PRICE: 1.0354 @ 05:45 GMT Nov 30
- SUP 1: 1.0297 Low Nov 23
- SUP 2: 1.0223/0198 Low Nov 21 / High Sep 12
- SUP 3: 1.0094 High Oct 27 and a key near-term resistance
- SUP 4: 1.0104 50-day EMA
EURUSD is trading below 1.0497, the Nov 28 high. Monday’s price action and bearish close highlights a possible top. In pattern terms, Monday is a shooting star candle - a reversal signal. An extension lower would expose key support at 1.0223, Nov 21 low. Clearance of this level would confirm a short-term reversal and signal scope for a deeper pullback. For bulls, a break of 1.0497, the Nov 28 high, is required to resume recent bullish price action.
AUSSIE BONDS: Firmer & Flatter On Domestic CPI & China PMIs
Aussie bonds have firmed, with softer than expected domestic CPI data and weak official PMI prints out of China facilitating the bid.
- The richening in the long end extended into the close, even with sub-average projections for month-end index extensions noted, while YM was capped by its post-CPI Sydney peak.
- That left YM +7.0 at the close, while XM was +7.5. Cash ACGBs ran 6.5-10.5bp richer on the day, bull flattening, after the previously flagged data releases more than reversed the early bear steepening.
- The latest round of ACGB Apr-33 supply went well. The recent stabilisation of the space away from cycle cheaps and edging of the line towards 10-Year benchmark status likely aided takedown.
- Bills were 3-10bp richer through the reds, while RBA dated OIS nudged lower post-data. Just under 20bp of tightening is now priced for the Bank’s Dec ’22 meeting, while terminal cash rate pricing is in to ~3.75%.
- Looking ahead, Thursday’s local docket includes capex data, the final m’fing PMI survey from S&P Global and the CoreLogic house price print.
