CAD: USD/CAD Off Earlier Highs, 50-day EMA Resistance Intact

US stocks remain stubbornly bid, the better backdrop for risk has seen AUD outperform and a market that is short especially in the crosses eyes a retracement.

• EUR/AUD - Overnight range 1.7499 - 1.7551, Asia is trading around 1.7525. The pair again found decent demand around 1.7500 overnight. After failing around 1.7700 last week a short AUD market will be hoping the support around the 1.7450 area holds, a break might see some of these positions unwound back signaling a move back towards the support around 1.7200.
• GBP/AUD - Overnight range 2.0691 - 2.0811, Asia is trading around 2.0700. A plunge in UK employment overnight saw a market that was already stalling fall away. A move sub 2.0700 could signal a deeper retracement back towards 2.0500.
• AUD/JPY - Overnight range 93.90 - 94.57, Asia is trading around 94.45. Price broke the multiple tops around the 94.00 area over NFP’s. It has since managed to hold these gains, while this continues focus will turn to the high towards 96.00. Support should now be back towards the 93.00/50 area.

• AUD/NZD -  Overnight range 1.0761 - 1.0795, the cross is dealing in Asia around 1.0775. A top looks in place now just above 1.0900, the cross topped out on Monday towards the 1.0800/25 sell area, the first target looks to be around 1.0650.

  Fig 1: GBP/AUD spot Hourly Chart

  

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

Natural gas peaked on Friday and has trended lower this week to be up only around 2% in June. European prices fell 2.3% to EUR 34.78 on Tuesday off the intraday low of EUR 34.44 helped by continued weak demand from Asia due to a mild summer and softer industrial demand driven by increased global trade uncertainty. This development is helping Europe to source cargoes to inject into storage ahead of next winter. However, warmer weather in Asia and Europe may boost global demand again.

• BloombergNEF showed European LNG imports rose to a 10-week high.
• Markets have worried that increased trade protectionism would reduce global energy demand. US-China trade talks have taken place this week and the Geneva Consensus was agreed to but it is now up to both presidents to agree to its implementation which could also allow further talks to take place. The focus had been on easing export controls.
• China has been shifting away from LNG imports, especially from the US, by increasing pipeline flows from Russia and its own output. 
• The EU is looking to extend sanctions on Russia including a ban on transactions with its Nord Stream pipelines as its war in Ukraine continues. There had been hope that a ceasefire may have enabled sanctions to be eased but with Russian drone attacks on Ukrainian cities escalating, the opposite is now looking likely.
• US gas fell 3.1% to $3.52 to be up 2.2% this month as supplies remain ample with elevated storage. Spring to date has been mild minimising cooling demand. Summer officially begins on June 20. It peaked at $3.82 on Friday. 

Japan's May PPI was below market expectations, we fell 0.2% m/m (against a +0.2% forecast). April's rise was revised to +0.3% (from 0.2%). In y/y terms we printed 3.2%, against a 3.5% forecast (prior was 4.1%). 

• The chart below plots the headline PPI y/y, against Japan CPI y/y. At face value it is suggesting less upside pressure on headline CPI pressures.
• In terms of the detail, manufacturing PPI was down 0.4%m/m. Weakness was evident in commodities, particularly petroleum, coal (-4.8%m/m). Iron ore and steel was also down in m/m terms.
• Import prices for commodities were down 1.1%m/m, continuing a negative trend, now off 10.3% in y/y terms. 

Fig 1: Japan PPI Y/Y & Nationwide CPI Y/Y 

Source: Bloomberg Finance L.P./ MNI