FOREX: Westpac See Merit in Sticking with Core AUD Longs
Jul-09 10:21
- AUDUSD has been holding onto a portion of the post RBA advance on Tuesday, consolidating around current spot levels of 0.6535 as we approach the NY crossover and maintaining the bullish trend set-up for the pair. Moving average studies remain in a bull-mode position, highlighting a dominant uptrend, and scope is still seen for a climb towards 0.6603 next, the Nov 11 high.
- AUDJPY has broken above resistance at 95.75 and strength overnight saw the cross trade up to 96.22, potentially signalling scope for a stronger rally towards the February highs at 97.33. Uncertainty regarding a US/Japan trade deal and a market that remains long JPY could strengthen a short-term extension of the rally.
- Westpac see merit in sticking patiently with core AUD/USD longs, looking for an eventual sustained break beyond 0.6590 resistance. Renewed tariff risks admittedly triggered an uncomfortable reset on 7 July, but overall, the pair is still in good shape and Westpac moderately upgrade their 1m target to 0.6625 (vs 0.6600).
- In similar vein, Westpac would not stand in the way of a bullish wave enveloping cross/JPY. AUDJPY downside over the next month is likely limited to the 94.80 area with potential upside extending as far the 97.50-98.00 area. There is next to no chance for any BoJ rate hikes while Japan tariff risks (25% starting 1 Aug) remain in place, while upcoming Upper House elections (20 July) make it politically challenging to settle on a deal that gives the US concessions.
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STIR: Holding Bulk Of Friday’s Hawkish Shift On Payrolls
Jun-09 10:19
- Fed Funds implied rates for 2025 meetings have pulled a touch back from Friday’s shift back towards their most hawkish since February but still hold the bulk of the increase seen on a solid payrolls report.
- Cumulative cuts from 4.33% effective: 0bp Jun, 4.5bp Jul, 18.5bp Sep, 30.5bp Oct and 46.5bp Dec.
- As you can see from the table below, the path is back close to levels seen shortly before higher jobless claims a week and a half ago started a run of dovish data that was reversed with the payrolls report.
- There are slightly larger shifts further out the curve but the broad takeaway remains -- the SOFR implied terminal yield of 3.39% (SFRZ6) is 4.5bp lower on the day but still 7bp higher since NFPs after Friday saw its highest close since May 14.
- It’s a quiet data docket both today and tomorrow, with data focus firmly on Wednesday’s CPI report for May.
- The FOMC is now in media blackout ahead of the Jun 17-18 meeting.
US 10YR FUTURE TECHS: (U5) Bearish Threat
Jun-09 10:17
- RES 4: 111-30 76.4% retracement of the May 1 - 22 downleg
- RES 3: 111-19+ 1.0% 10-dma envelope
- RES 2: 111-14+ High Jun 5 & 61.8% of the May 1 - 22 downleg
- RES 1: 110-20+ 50-day EMA
- PRICE: 110-03+ @ 11:04 BST Jun 9
- SUP 1: 109-26 Low May 29
- SUP 2: 109-12+ Low May 22 and the bear trigger
- SUP 3: 109-09+ Low Apr 11 and key support
- SUP 4: 108-25+ 0.764 proj of the Apr 7 - 11 - May 1 price swing
The reversal in Treasury futures from last Thursday’s high, undermines a recent bullish theme. An extension would expose support at 109-26, the May 29 low, where a break would open key support and the bear trigger, at 109-12+, the May 22 low. Key short-term resistance has been defined at 111-14+, a Fibonacci retracement and the Jun 5 high. A break of this hurdle would be bullish.
BONDS: BTP Block trade
Jun-09 10:13
BTP Block trade, suggest buyer:
- IKU5 ~1.1k at 121.06.
So far the BTP/Bund spread finds good support at the big Psychological 90bps level.
