FOREX: USD(BBDXY) - Rejects The 1200 Area & Turns Lower Ahead Of NFP

The pace of outflows from Korea and Taiwan continue to dominate the overall flow story for Asia (ex Japan) equities.  The growing concerns as to the valuations of SK Hynix, Samsung and TSMC are now challenged since the launch of CXMT on the Shanghai exchange.  From its peak KOSPI is off now -32% whilst the TAIEX down -9.4% and within that SK Hynix is down -48% and TSMC -15%.  The outlook remains bleak for both in the near terms as the effects of leveraged ETFs in Korea continues to reverberate.  

Flows in the early stages of the week are poor with Korea losing $2bn in the first few days whilst Taiwan -$592m.  

India is a bright spot for now with inflows of $1bn in recent days with this week starting off with modest but positive gains.  

The YTD picture is bleak as outflows from the major markets tops $17.6bn. 

The NZD/USD had a range today of 0.5862-0.5873 in the Asia-Pac session; it is currently trading around 0.5870. A very mute session in Asia for the Kiwi. The pair has topped out above 0.5900 as the market absorbs the huge USD sales from the USD/JPY intervention, though its pullback did lag the rest of the market probably due to positioning(fig.1). This surge at the back-end of last week would have hurt a market positioned the wrong way and I reckon we might have to do some work before it finds a clear direction again. Liquidity in the NZD can sometimes be an issue, so I will continue to watch if this knee-jerk bounce becomes anything more than that. I suspect we could chop around within a 0.5780-0.5920 range while it settles down.

• MNI - NZ Q2 Jobs Data Likely To Show Ongoing Excess Capacity: Q2 labour market data including wages are published Wednesday. Q2 filled jobs and Bloomberg consensus suggest that employment may record the fourth consecutive quarter of growth but it’s still likely to be muted with only a 0.1% q/q increase expected bringing the annual rate up to 0.7% from 0.4%. The unemployment rate is forecast to rise 0.1pp to 5.4%. This is consistent with ongoing excess capacity in NZ which is helping to limit firms’ pricing power and workers’ wage demands, which could allow the RBNZ not to hike at every meeting, especially if Q2 disappoints expectations.
• CFTC Data up to 28/07/2026 shows Asset Managers maintained their reduced core short positions in the NZD more meaningfully, -44 157(Last -43 615). The Leveraged community did likewise holding onto their core shorts, -30 606(Last -31 649). 
• Options : Closest significant option expiries for NY cut, based on DTCC data:  none. Upcoming Close Strikes : 0.5760(NZD307m Aug 5), 0.6100(NZD486m Aug 6) - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 44 Points

Fig 1: NZD CFTC Data

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

Fig 2: NZD/USD Spot Daily Chart

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

The AUD/USD has had a range today of 0.6996-0.7024 in the Asia- Pac session, it is currently trading around 0.7020, +0.25%. The AUD has drifted a little higher in our session in what looks to be some profit-taking in the crosses. The pair's surge higher looked to be stalling above 0.7000 as the USD selling pressure from the Yen intervention gets absorbed into the system. Stocks continue to build on their resurgence at the back end of last week, aiding the risk-on backdrop. The Middle-East fiasco though continues at pace, Trump saying they are negotiating, the Iranians though don't seem to think so. A crucial point though overnight when Trump told reporters he would not let Iran charge for passage through the Straits, while these red-lines remain poles apart I just don't see how it gets reconciled. He is either going to have to go in and look for a regime change or back down from his demands, neither is palatable for him. On the day, the initial knee-jerk higher from the USD/JPY intervention seems to have abated for now. Initial support is back toward 0.6950-0.6980 and resistance is in the 0.7050-0.7080 area. I suspect we might do some work around here now as the market consolidates and tries to regain some direction. It looks like 0.6925-0.7075 for now but I would still prefer to be skewed toward fading rallies for now, though the crosses remain the best place for those wanting to express AUD underperformance.   

• MNI - AU Strong Discretionary Spending Signals Consumer Resilience: June household consumption was materially higher than expected rising 0.8% m/m to be up 6.0% y/y up from May’s 5.5%, driven by another strong month of discretionary spending. The data is evidence that depressed consumer sentiment is “so far not flowing to” consumption, as RBA’s Hunter said last week. While rates are likely to be left at 4.35% on 11 August, the central bank will continue to monitor demand strength given the economy’s supply constraints and above-target underlying inflation.
• CFTC Data up to 28/07/2026 shows Asset managers slightly reducing their recently built shorts -32 107(Last -35 779). The Leveraged community added slightly to their core longs, +23 616(Last +20 521).  
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6900(AUD1.35b), 0.7000(AUD1.19b). Upcoming Close Strikes : 0.7000(AUD1.62b Aug 6), 0.7250(AUD731m Aug 5) - BBG
• The AUD/USD Average True Range for the last 10 Trading days: 49 Points

Fig 1: AUD/USD spot Daily Chart

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