CNH: USD/CNH Tests Above 7.2100 On Broad USD Gains, Official PMIs Today
USD/CNH rose just over 0.40% for Wednesday's session, as the USD was supported by a hawkish Fed hold, along with better than expected data outcomes. We track near 7.2100 in early Thursday dealings, which is fresh highs back to early June. Broader USD indices were all noticeably higher, with the BBDXY up close to 0.80%, while the DXY gained over 1%. Spot USD/CNY ended at 7.1972, while the CNY CFETS basket tracker rose further to 96.42, up +0.13% for Wednesday's session.
- For USD/CNH we are just above the 100-day EMA resistance point, near 7.2080. Further north is the 200-day resistance point at 7.2210. The pair hasn't been above these resistance points since early May. The 50-day EMA< which is now a potential support zone sits back near 7.1890.
- US Tsy yields were firmer across the board, the 2yr up 7bps to 3.94%. Fed Chair Powell didn't give a nod to a September cut, while US data mostly surprised on the upside. The Citi US surprise index is now at highs back to late May.
- These factors and a market still generally bearish the USD drove broader USD gains for Wednesday. For CNH, Wednesday losses weren't as large as most of the G10, with the EU bloc down the most. EUR/CNH is back close to 8.2300, fresh lows since mid June.
- Locally today we have the official PMI prints for July. The market consensus for the manufacturing print is 49.7 (unchanged from June), while non-manufacturing is expected at 50.2 (50.5 was the June outcome).
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NEW ZEALAND: Q2 NZIER Business Confidence Firms, But Lack Of Demand Cited
The Q2 NZIER business confidence survey showed improvement, but underlying activity remained weak. See this link for more details.
- NZIER noted: "A net 27 percent of firms expect an improvement in general economic conditions over the coming months on a seasonally adjusted basis, which was a further lift from the net 23 percent in the March quarter."
- It added: "Although the sharp interest rate cuts since August last year have boosted confidence, the effects of lower interest rates remain slow to flow through to a lift in real activity. With demand remaining soft, firms continue to be cautious about hiring. A net 12 percent of firms reduced staff numbers in the June quarter, although a net 4 percent expect to hire in the next quarter."
- On inflation/costs: "Cost and pricing indicators suggest an easing in inflation pressures in the June quarter. The easing of capacity pressures is reflected in the continued dominance of firms reporting a lack of sales as the primary constraint on their business, as opposed to those reporting finding labour as the primary constraint."
AUSSIE 10-YEAR TECHS: (U5) Bear Cycle Remains Intact For Now
- 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: 95.790 @ 16:51 BST Jun 30
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures rallied well on the RBA rate decision, reversing a small part of recent weakness. Recent price action pressured prices through to new pullback lows last week. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition. To the upside, a recovery of recent losses would shift attention to resistance at 96.207, a Fibonacci retracement point.
US TSYS: Yields Extend Lower Into Month-End
TYU5 reopens at 112-02, down 0-02 from closing levels in today’s Asia-Pac session.
- Overnight the US 10-year yield had a range of 4.2202% - 4.2788%, closing around 4.228%.
- Treasury yields all moved lower overnight led by the long-end, which saw the yield curve flatten (2s10s -2.22 at 50.466, 5s30s -2.79 at 97.554).
- MNI Interview - Atlanta Federal Reserve President Raphael Bostic told an MNI Connect event Monday the potential for tariffs to create inflation pressure into next year means going slow on cutting interest rates with one this year and three in 2026, expressing a broader caution until there's clarity around U.S. fiscal policy and global conflicts
- (Bloomberg) - Traders snapped up long-dated bonds, flattening the US Treasuries’ yield curve on Monday, ahead of the quarter-end, and after US Treasury Secretary Scott Bessent appeared to rule out an increase in issuance of longer-dated debt.
- The 10-year yield has accelerated through its support, this should clear the way for a move lower with the 4.10% area the first target. 10-year yields should now find demand on any bounce back to the 4.35/40% area.
