FOREX: USD(BBDXY) - Pulls Back After Touching 1220, Can We See Some Reversion

The NZD/USD had a range today of 0.5902-0.5925 in the Asia-Pac session; it is currently trading around 0.5920, +0.08%. The pair extended its pullback from the 0.6000 area on Friday night. The US Dollar has bounced thanks to the Warsh speech at Jackson hole, the demand in the Cross just adding to the pair's headwinds. The price action for the NZD continues to look constructive while holding above 0.5800-0.5850 and I will be watching to see how the US Dollar trades to start this week after getting a welcome reprieve. On the day, the first support is around 0.5860-0.5890 and then the 0.5800 area comes back into play. Will the dips continue to be supported to have another look toward 0.6000 or can the US Dollar build on this relief from Warsh. The focus this week will be on NFP and what that would mean for a market now looking for potential US rate hikes.

• “NEW ZEALAND GOVT. CANCELS FUEL TAX HIKE PLANNED FOR NEXT YEAR" - BBG
• MNI - NZ NEW ZEALAND: Recovery Continues While Expected Price/Cost Rises Steady. While ANZ business confidence and the activity outlook moderated slightly in August, the Q3 averages are their highest since Q4 2025 and activity compared to a year ago, which has a good correlation with GDP, was higher than July driven by services. Overall, ANZ sees this as a positive sign of recovery. Confidence fell to 53.7 this month from 56.1 while the activity outlook fell 1 point to 48.2. Cost/price components were mixed but many were higher or steady. The RBNZ is widely expected to hike rates on September 2 as it shifts policy towards neutral.
• (Bloomberg) -- "RBNZ Shadow Board Majority Recommends Cash Rate Increase: NZIER. A majority of the RBNZ Shadow Board recommends the Official Cash Rate should increase a quarter point to 2.75% this week, the NZ Institute of Economic Research says Monday in Wellington."
• Options : Closest significant option expiries for NY cut, based on DTCC data:  none. Upcoming Close Strikes : 0.6030(NZD442m) - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 38 Points

Fig 1: NZD CFTC Data

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

The USD/JPY range today has been 159.73-160.20 in the Asia-Pac session, it is currently trading around 159.75. The pair spiked higher on Friday, having another look above 160.00. The US Dollar was given a welcome reprieve by Warsh, though I am sure the MOF would not be happy looking at what just shy of $100 Billion sales got them. I still have decent resistance back toward the 161 area, but I will be watching to see if the US Dollar is able to follow through on that bounce this week. The USD had broken below some pivotal support, can it put in a false break and turn that move around ? The BOJ needs to be able to sufficiently signal it is more comfortable with raising rates at a quicker pace or the Yen’s gentle tailwinds that are trying to emerge could be dashed. Lets see what the USD does as attention now turns to NFP’s, while this plays out it looks like a wide and choppy 155-161 range.  

• (Bloomberg)-  "US Treasury Secretary Scott Bessent said he expects Bank of Japan Governor Kazuo Ueda "to do the right thing" on monetary policy. Expectations that the BOJ will raise rates at a faster pace have increased, with overnight swaps pointing to an 88% likelihood of a rate hike at the central bank's September meeting."
• "Japanese bond yields have climbed sharply, leading analysts to say the Government Pension Investment Fund may be justified in raising its domestic debt allocation target from 25% to seek higher returns." - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 159.00($1.44b), 159.65($1781m),161.00($872m). Upcoming Close Strikes : 159.25($1.2b Sept 2), 159.60($1.58b Sept 2), 165.00($1.63b Sept 3) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 69 Points

Fig 1 : JPY CFTC Data

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

The AUD/USD has had a range today of 0.7154-0.7171 in the Asia- Pac session, it is currently trading around 0.7165, +0.03%. The pair dropped quickly after stalling above 0.7200 thanks to a hawkish Warsh speech, some USD demand for corporate month-end could also have added some weight toward the latter stages of the Friday session. Was that speech enough to turn around the woes of the US Dollar ? It's a big ask. We have NFP’s this week and another weak print would have the market questioning if the Fed can actually raise rates. This morning risk is opening up on the backfoot in Asia thanks to renewed strikes by the US on Iran, with the normal promise of a reprisal to come. This is just adding to the headwinds for risk following on from Friday that has seen its recent bounce stall. On the day, the first support is back toward 0.7120-0.7150, through here the 0.7050-0.7085 area is next. I will be watching to see if the dips remain  supported and how the USD fares as the focus now turns to NFP. Expressing AUD outperformance in the crosses has been the better way to go and while 0.7200-0.7250 caps it that probably remains the case. 

• MNI - AU Highest Inflation Gauge Since End-2023 Increases Hike Risk. This data adds to the case for another rate hike as there are increasing signs that the upside risks the RBA fears are materialising. The next meeting is 29 September with August CPI not until 30 September, therefore other price data, such as the inflation gauge, are important. 
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.7050(AUD358m), 0.7120(AUD503m). Upcoming Close Strikes : 0.7100(AUD663m Sept 1), 0.7120(AUD623m Sept 2) - BBG
• The AUD/USD Average True Range for the last 10 Trading days: 36 Points

Fig 1: AUD CFTC Data

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