CNH: USD/CNY Fixing Lower, Error Term Tightens

• CHINA SETS YUAN CENTRAL PARITY AT 7.1586 MON VS 7.1627

There has been plenty written about why US stocks should struggle but in the end a poorly positioned market has been forced to cut their underweights and with indices making new highs the momentum type funds will again be adding to their positions. This morning has seen this bounce resume as US futures open our session strongly ESU5 +0.25%, NQU5 +0.35%. CFTC data out for last week shows both Asset Managers and Leveraged Funds added to their AUD short positions, given how poorly the USD is trading one would expect most of these shorts are being expressed in the crosses where the AUD trades poorly particularly against the EUR and GBP.

• EUR/AUD - Friday night range 1.7854 - 1.7974, Asia is currently trading around 1.7940. The pair again found some supply back towards the 1.8000 area on Friday night, it has had a good run higher but what stands out is that with risk surging higher the AUD has still remained under pressure. First support seen back towards the 1.7800 area, a break above 1.8000 and the move could extend higher.
• GBP/AUD - Friday night  range 2.0954 - 2.1027, Asia is trading around 2.1000. This pair continues to meet supply towards the multiple tops above 2.1000. A sustained break above 2.1050 is needed to see the move higher regain momentum, like EUR/AUD though a more positive risk backdrop should potentially have seen this pair back off a little, which it has failed to do.
• AUD/JPY - Friday night  range 94.23 - 94.75, Asia is trading around 94.45. Choppy price action as the pair establishes a range between 92.00 - 96.00. Should risk build on this move, focus could turn back to the 96.00 area.
• AUD/NZD -  Overnight range 1.0773 - 1.0797, the cross is dealing in Asia around 1.0770. The cross is struggling to get any momentum for now. It looks to be in a 1.0750 - 1.0850 range for now as it awaits a catalyst to provide some direction.

Fig 1: GBP/AUD spot Hourly Chart

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

The ESU5 Friday night range was 6183.25 - 6239.00, Asia is currently trading around 6240. After pushing up to new all-time highs on Friday night, stocks had a quick reversal on the news Trump was ending trade talks with Canada, after dropping close to 1% from their highs US stocks bounced back into their close. This morning has seen this bounce resume as US futures open our session strongly ESU5 +0.25%, NQU5 +0.35%. There has been plenty written about why US stocks should struggle but in the end a poorly positioned market has been forced to cut their underweights and with indices making new all-time highs the momentum type funds will again be adding to their positions. Month-end, Quarter-end tonight might see some selling in a market that looks a little overdone but direction seems clear in the short-term.

• Julien Brigden on X: "We are bombarded by "S&P at new highs". But it's MONEY ILLUSION. By staying in US stocks, you are getting relatively poorer. Yes, in $ terms, the S&P is up 5% YTD, but flat in foreign currencies. As a US investor, you'd be up  20% in European stocks. This is why FX is key!” 
• Lance Roberts on X: ”For 10 straight years, the S&P 500 has gained in July—an impressive record. Historically, July is the best month for stocks in post-election years. Another gain this July would tie the longest winning streak for the month in history.” See Graph below.
• The Big Beautiful Bill will add roughly $3.3 Trillion to the U.S. Deficit warns the Congressional Budget Office.(BBG)
• Both S&P and the NASDAQ are now making new all-time highs as Tech continues to lead the indices higher. Interesting that the Russell and the Dow Transports are still lagging by quite a bit.
• This in the face of some well documented headwinds that have been building. These include: Share buybacks that are now in their blackout period, the absence of this large underlying bid reportedly around $40 billion a week, has barely registered for now. 
• This together with what looks to be some large month-end rebalancing was to provide some decent headwinds for US Equities in the short-term. 
• Zerohedge on X: ”Pension funds are estimated to sell $56BN in global equities at month-end: UBS”

Fig 1: SPX Win Streak For The Month Of July

Source: MNI/@LanceRoberts/Carson Group