CNH: USD/CNH Edges Lower, Trump-Xi Call Speculation Continues
USD/CNH tracks near 7.1900 in early Wednesday dealings, after gaining just over 0.25% For Tuesday's session. CNH outperformed firmer USD indices, with the DXY rebounding 0.55% (the BBDXY index gained around 0.40%). Spot USD/CNY finished up at 7.1883, while the CNY CFETS basket tracker fell by 0.18% to 95.79 (per BBG). This is within striking distance of recent cycle lows for the index from April.
- For USD/CNH spot we remain within recent ranges, with recent highs marked just above 7.2240, while end May lows were close to 7.1800.
- Headlines crossed overnight that US President Trump and China President Xi would speak this Friday, per White House sources. Still nothing was confirmed that this will actually take place. Per Barron's "At a press conference Tuesday afternoon, White House press secretary Karoline Leavitt said that President Donald Trump and China leader Xi Jinping will have a call "very soon." She didn't specify which day it would take place."
- This follows remarks from both the US and China sides that both countries are not sticking to what was agreed at the meeting in Geneva last month.
- We may see USD/CNH remain within recent ranges until greater clarity on the trade outlook is achieved. In the cross asset space, local equities were firmer onshore yesterday (CSI 300 +0.31%), while in US trade the Golden Dragon index rose 0.56%, its second straight gain.
- The local data calendar is empty until tomorrow's Caixin services PMI print.
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AUSSIE 10-YEAR TECHS: (M5) Remains Toward Top End of Recent Range
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.735 @ 16:19 BST May 2
- SUP 1: 95.420/95.300 - Low Feb 13 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.640 - 1.0% 10-dma envelope
Aussie 10-yr futures extended a recent strong bounce through to the Friday close, putting prices through the top end of the recent range. The confirmed breach of 95.851, the Dec 11 high on the continuation contract, reinstates a bull cycle and focuses attention on resistance at 96.207, a Fibonacci retracement point. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
US TSYS: Front End Leads Yield lower
TYM5 reopens at 111-10, up 0-05 from closing levels in today’s Asia-Pac session.
- Friday night US 10-year yields had a range of 4.1942% - 4.3297%, closing near the highs.
- Treasury yields were quite a lot higher Friday night reacting to a strong NFP, The move was led by the front-end with the 2yr up 0.13, flattening the yield curve.(2s10s -3.25 at 48.232).
- MNI US - Nonfarm payrolls were higher than expected at 177k (sa, cons 138k) of which private contributed 167k (sa, cons 125k).
- However, two-month revisions of -58k offset the 39k beat for nonfarm payrolls, with a similar story for private (a 42k surprise vs -48k two-month revision).
- Downward revisions were concentrated in March.
- This better than expected data drove price action for most of the US session.
- Kato : “We are not considering the sale of US Treasuries as a means of Japan-US negotiations,” Kato spoke in Milan, Italy on Sunday, where he is attending the annual meeting of the Asian Development Bank.(per BBG)
- The 10-year Yield range seems to be 4.10% - 4.45%, with the pivot the 4.30% area for now.
AUSSIE 3-YEAR TECHS: (M5) Within Range of Highs
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.860 - High Apr 07
- PRICE: 96.620 @ 16:18 BST May 2
- SUP 1: 95.900 - Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures continue to circle just below recent contract highs, having cleared resistance on the continuation contract. The rally has taken out resistance at 96.730, the Sep 17 ‘24 high. On the downside, any reversal lower from current levels would signal a resumption of a downtrend. A deeper sell-off would refocus attention on 95.760, the 14 Nov ‘24 low.
