FOREX: USD - Trades Heavy Even After A Strong Payrolls
The BBDXY has had a range today of 1180.12 - 1182.72 in the Asia-Pac session; it is currently trading around 1181. The USD has drifted lower for most of our session as the market tries to interpret its inability to react to the better Payrolls data. The market is very bearish the USD and it does not take a lot for the sellers to come back to market as nobody wants to miss out on this trade. Even the significant bounce in US yields as cuts were priced out did little to aid it. On the day, the first resistance is toward the 1185-1187 area and then 1195 where I suspect we could see buyers return. A sustained break below 1175-1180 could potentially signal the start of another leg lower targeting 1150 first and then potentially 1115, see graph below.
- EUR/USD - Asian range 1.1864-1.1885, Asia is currently trading 1.1865. The pair found buyers back toward 1.1800 as the USD initially got bought, but unlike other currencies the EUR has not quite got back to its highs from yesterday. Price action remains constructive, can it now build some momentum from that base to push on? On the day, the first support is back toward 1.1820-1.1850 and then the 1.1750 area. A sustained move back above 1.1925-1.1940 could give it the thrust it needs to have another look toward the 1.2000 area.
- GBP/USD - Asian range 1.3616-1.3642, Asia is currently dealing around 1.3625. The pair is trading pretty poorly considering how weak the USD is. GBP continues to look like 1.3580-1.3730 to me for now as we wait to see if the big USD could potentially break lower, could CPI Friday give it the nudge it needs ?
- Cross asset : SPX +0.30%, Gold $5055, US 10-Year 4.175%, BBDXY 1181, Crude Oil $65.01
- Data/Events : Germany Current Account Balance
Fig 1: BBDXY Spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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US TSY FLOWS: BLOCK CURVE FLATTENER: SELL TUH6 / BUY UXYH6
SELL 8300 of TUH6 traded at 104-07 3/4, post-time 15:01:41 AEST (DV01 $317,407). The contract is currently trading at 104-07 3/4, 0-00 3/8 from closing levels.
BUY 3540 of UXYH6 traded at 114-23, post-time 15:01:41 AEST (DV01 $317,827). The contract is currently trading at 114-23, 0-01+ from closing levels.
NZD: NZD/USD - Drifts Higher, Bears Need To Cap Move Below 0.5810-0.5830
The NZD/USD had a range today of 0.5766-0.5781 in the Asia-Pac session, it is currently trading around {NZD Curncy}. The NZD has been grinding higher thanks to the headwinds faced by the USD. The NZD has put in what looks like a top around 0.5850 and while this continues to cap I suspect the short-term could see bounces initially faded. On the day, the NZD bears need to hold this area toward 0.5810 to remain in control, a move back above 0.5810-0.5830 would negate what looked like the beginning of a new leg lower. Look for sellers up here initially with a view to reestablishing a potential downtrend.
- MNI AU - NZIER Survey Shows Surge In Business Conditions, Inflation Steady: The Q4 NZIER (New Zealand Institute of Economic Research) Quarterly Survey of Business Opinion (QSBO) printed this morning and showed a strong improvement versus the Q3 result. This should increase confidence in the economic recovery taking hold in 2026, and adds to the case for a steady RBNZ hand in the near term (at the margin).
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5800(NZD400m), 0.5830(NZD373m). Upcoming Close Strikes : 0.5745(NZD349m Jan 14), 0.5800(NZD420m Jan 16) - BBG
- The NZD/USD Average True Range for the last 10 Trading days: 40 Points
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
CHINA: 10-Yr Bond Future Near Key Tech Level, NDIRS Steady (amended)
- China bond futures are higher today, following the first significant liquidity injection of the year via the OMO.
- The 10-Yr is up +.04 at 107.83 having spoked to 107.87 earlier and the 2-Yr is flat at 102.32.
- The move higher in the 10-Yr sees it near to its topside resistance from the 20-day EMA at 107.89.
- Cash is slow today with the 2-Yr at 1.43% and the CGB 10-Yr down modestly in yields at 1.85%
- 2-year NDF are flat at 1.50 and 10-Yr flat at 1.74%
- The next key event for markets will be the trade data for December out tomorrow.
