FOREX: USD(BBDXY) - Holding Above 1219-1220, Can It Now Bounce ?

US Tsy futures sit off earlier highs, TYZ6 was last 106-00, down a touch for the session and off earlier highs (106-04+). The tick up in oil futures, with benchmarks up around up close to 1.00% currently, likely weighing at the margins. A reminder that Japan markets are still out today (returning Thursday), meaning there is no US Tsy trading during Asia Pac hours today. For US TSY futures, downside focus will rest at mid Sep lows around 105-21, although dips under 106-00 have been supported since late Aug.

The data and Fed speaker schedule gets a little busier Tuesday, with regional Fed activity reports (Richmond, Philly), weekly ADP payrolls, and the US Treasury Market Conference bringing appearances by NY's Williams, SOMA manager Perli, and Gov Jefferson (separately we hear from Richmond's Barkin). Additionally, Treasury sells $69B in 2Y Note at auction.

The AUD/USD has had a range today of 0.7098-0.7125 in the Asia- Pac session, it is currently trading around 0.7120, +0.04%. The pair continues to consolidate just above 0.7100 without being able to get any upward momentum as of yet. Risk has surged overnight, US Equities are looking to challenge their all-time highs, Oil fell and Bitcoin broke higher(+7%). Yet currencies remain subdued, there is a clear disconnect and the relationship between the US Dollar and Risk seems to be diverging. How long does this last ? And which leg is wrong ? The AUD has been a favoured long while risk trades on the front foot, in the current environment I would have expected it to be performing better, does it play catch up ? On the day, while the support between 0.7050-0.7100 holds the Bulls will continue in their attempt to reassert its uptrend. The AUD has found rallies being faded toward the 0.7130-0.7160 area initially. A sustained break above there and the bulls could potentially wrest back control and play catch up to the move in risk.  

• “RESERVE BANK OF AUSTRALIA GOV BULLOCK: SUPPLY SHOCKS ARE DIFFICULT FOR MONETARY POLICY TO DEAL WITH. POLICY NEEDS TO DEAL WITH SECOND ROUND EFFECTS ON INFLATION - [RTRS]"
• “Global AI stocks rallied as early signs of success for Meta’s new personal agent Muse revived optimism over chip demand.” - BBG
• Options : Closest significant option expiries for NY cut, based on DTCC data:  0.7050(AUD400m), 0.7100(AUD457m). Upcoming Close Strikes : 0.7050(AUD715m Sept 23), 0.7125(AUD628m Sept 23), 0.7160(AUD703m Sept 24) - BBG
• The AUD/USD Average True Range for the last 10 Trading days: 37 Points

Fig 1: AUD/USD spot Daily Chart

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

Aussie Bond futures are off earlier highs, as comments from RBA Governor Bullock cross (from her Fireside chat). 3yr futures sit down a touch, last near 95.00. Earlier highs were at 95.035. 10yr futures were last 94.70, little changed for the session (earlier highs were at 94.73). The RBA Governor isn't doing anything to push back on current market pricing, noting the central bank has to deal with second round inflation effects and that the concern is that inflation expectations become embedded. She also noted that there are few signs that AI is influencing the supply side of the economy, but it is adding to excess demand. 

• A hike for next week's RBA meeting is a little over 90% priced per OIS markets. It is unusual for the RBA not to tighten when pricing is that elevated.
• For Aussie futures, levels to watch for the 10yr are 94.515 support, which was the Sep 15 low. Late Aug highs were just above 94.80. For the 3yr, recent lows rest at 94.875. The 20-day EMA is around 95.13 currently.
• ACGB yields have pared earlier losses, now back to around flat. NZGB yields are also up from lows (after some hawkish remarks from RBNA Governor Breman).
• US Tsy futures have also ticked lower, as oil futures have recovered ground.
• Note as well, later at 5:30pm local time, "Speech by Iain Ross AO, MPB member, at the University of Melbourne Centre for Employment and Labour Relations Law, Melbourne." via the RBA website.