AUSSIE 10-YEAR TECHS: (Z5) Clears Resistance

The AUD/USD had a range overnight of 0.6583-0.6615, Asia is trading around 0.6595. US stocks finally took a breather and US yields topped out as we heard from some of the dovish Fed Governors. The USD though traded sideways with little clear direction. The AUD/USD continues to do some work around 0.6600 and should still see dips supported for now with the first buy-zone back towards the 0.6500/0.6550 area.

• Bloomberg -  “Australia’s Albanese to Meet With Trump in Washington on Oct. 20. “President Trump agreed to a meeting some time ago, we had another chat about it on the phone and we’ll have a meeting in Washington DC on Oct. 20,” Australian Prime Minister Anthony Albanese said at a press conference in New York.”
• Australia’s August CPI report is likely to show inflation holding firm near the top of the Reserve Bank of Australia’s 2%-3% target band.” - Bloomberg Economics
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6600(AUD904m), 0.6625(AUD575m), 0.6720(AUD791m). Upcoming Close Strikes : 0.6625(AUD1.29b Sept 29), 0.6725(AUD1.19bm Sept 29), 0.6730(AUD466m Sept 25) - BBG
• CFTC Data last week shows Asset managers started to significantly reduce their shorts, -41095(Last -68333). The Leveraged community has pulled back their shorts to be almost flat, -1519(Last -5081).
• Data/Event: CPI

Fig 1: AUD/USD spot 2H Chart

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

TYZ5 reopens at 112-31, up 0-03 from closing levels in today’s Asia-Pac session.

• Overnight the US 10-year yield had a range of 4.1023% - 4.1466%, closing around 4.106%. 
• Treasury yields retracement higher stalled overnight and saw yields end lower; this was led by the Long-end which saw the yield curve flatten (2s10s -2.36 at 51.798, 5s30s -1.00 at 104.934).
• 10-Year Yields found some buyers back towards 4.15%. Is that the top, I suspect we test the 4.20% area at some point where demand should again return. A sustained break through 4.00% is needed for the focus to then turn towards the 3.80% area. 
• MNI FED: Powell Reiterates "There Is No Risk-Free Path", Policy Not On Preset Course. His comments don't appear to deviate much if at all from last week's FOMC press conference, hence a limited market reaction. "Two-sided risks mean that there is no risk-free path. If we ease too aggressively, we could leave the inflation job unfinished and need to reverse course later to fully restore 2 percent inflation. If we maintain restrictive policy too long, the labor market could soften unnecessarily. When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate."
• MNI FED: Atlanta Fed Bostic's Longer-Run Dot Suggests Limited Impetus To Cut Further.Atlanta Fed President Bostic added some reflections on the economy and rates in a podcast recording Tuesday morning. Recall that in an interview published in the Wall Street Journal Monday he confirmed he maintained his view for just 1 rate cut in 2025, which makes him among the 7 most hawkish members on the Committee in terms of 2025 rates, with 6 of 19 members writing in 4.1% end-year Fed funds in the Dot Plot.

Fig 1: 10-Year US Yield 2H Chart

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

USD/CNH largely tracked sideways post the Asia close on Tuesday. We track near 7.1130 in early Wednesday dealings, slightly down from recent highs near the 7.1200 level. Broader USD indices were down a touch for Tuesday's session. Spot USD/CNY finished up at 7.1132, while the CNY CFETS basket tracker lost a little ground (-0.10%) to 96.45. 

• For spot USD/CNH technicals, little has changed. We remain sub all key EMAs, the 20-day at 7.1250, while the 50-day is at 7.1480. renewed downside focus is likely to rest back under 7.1000. Implied vol levels for USD/CNH continue to track lower, making fresh cycle lows sub 2.50% in Tuesday trade.
• There were numerous Fed speakers overnight, with Chair Powell's outlook not deviating much if at all from last week's FOMC press conference as "two-sided risks mean that there is no risk-free path." US Tsy yields finished lower, led by the back end, while equity sentiment also softened.
• US-CH yield differentials sit slightly lower but remain up from recent lows. The Golden Dragon equity index lost a further 2.22% in US Trade overnight, down for the fourth straight session. Onshore equities fell a touch yesterday.
• More work appears to be needed around China rare earth exports, at least according to US lawmakers who visited China recently. The same officials are also hopeful of a big Boeing order from China.
• The local data calendar is empty until Aug industrial profits print (out on Saturday).