CNH: USD/CNH Under 7.0200, Downtrend Intact, But CNY Basket Falls

The Friday night range was 1.1495 - 1.1517, the Cross is dealing in Asia around 1.1510. The Cross found some bids just below the 1.1500 area on Friday night. This 1.1500-1.1600 area remains tough resistance and we are seeing the first signs of the upward momentum stalling. A sustained move back above 1.1600/50 and the market will start to get bulled up again as the focus will turn toward the 1.2000 area and beyond. I have been a little wary of NZD positioning as the market got extremely beared up, the recent price action does suggest we are seeing signs of the NZD underweight being pared back. The risk into the RBNZ this week is they are not dovish enough which could provide short-term headwinds to some of the weaker hands. It will take a little more than that though to discourage the longer-term cross bulls though who have been in full control, I suspect a decent dip will remain well supported back toward 1.1250-1.1350 at first asking. 

• The AUD/NZD Average True Range(ATR) for the last 10 Trading days: 55 Points

Fig 1: AUD/NZD spot Weekly Chart

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

European gas fell 2.8% to EUR 30.30 on Friday off the low of EUR 30.307, to be its lowest in over a year and half despite storage falling to 79.1% from around 83% at the start of November. Prices fell 3% over last week with the US announcing it had a Ukraine peace plan and talks have taken place between the US, Ukraine and Europe, which may lead to an eventual easing of sanctions on Russian fuel. While Europe is looking to phase out its remaining Russian gas consumption, fewer restrictions would increase available global supply. 

• The market move is optimistic though given that there is a long way to go before a peace deal is implemented and Russia has pulled out before resulting in no change in the situation.
• Tight enforcement of current restrictions is unlikely while talks are ongoing, which are due to continue on Monday and if they go well President Zelenskyy could visit the US this week.
• Concerns that the US deal, which favours Russia, was inflexible have been calmed with President Trump saying that it was not final, Zelenskyy posting there are “signals that President Trump’s team hears us” and the White House saying Ukraine’s concerns had been addressed.
• Projections are signalling mild weather at the start of December in Europe, according to Vaisala.
• Unlike Europe, US gas prices rose 2.3% to $4.4577 to be up 11% in November driven by forecasts for colder weather into December. They are now approaching overbought levels, according to Bloomberg.
• Lower-48 US gas production rose 7.6% y/y on Friday while demand fell 9.2% y/y and estimated flows to LNG export facilities were down 1.8% w/w, according to BNEF data. 

The Nikkei(NHZ5) contract Friday night range was 48030 - 49065, Asia is currently trading 48925 +0.30%. The support level toward 4800 proved to be solid in the New York session, and with risk opening strongly this morning on the back of a good bounce in Crypto over the weekend I suspect we could start the week with a bid tone. The Nikkei 225 technically remains in an uptrend while the support toward 48000 holds, albeit a very steep one. The price action in risk last week still makes me wary and would keep me skewed towards looking for opportunities to fade initially. On the day though I suspect we might see a relief bounce but I would be looking for sellers to potentially return between the 50000-50500 area. 

• The Nikkei 225 Index Average True Range(ATR) for the last 10 Trading days: 1278 Points

Fig 1: Nikkei 225 Daily Chart

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