AUD: Outperforms On Crosses, Q1 GDP in Focus Today
AUD/USD was weaker post the Asia close, dragged down by broad USD strength. We outperformed on a cross basis though. We open this morning around 0.7175.
- Equity sentiment was softer in the US and EU for month end, while the US VIX index faded from an earlier spike above 28% to close in the low 26% region.
- This didn't derail AUD/JPY though, with the pair pushing back above the 50-day MA at 91.92, we open this morning at 92.36. Yen underperformed within G10 FX on the global sell-off in fixed income.
- Commodities lost ground, with iron ore back to the low $130/tonne region. Copper also fell modestly, while oil moved away from highs late in the US session.
- The main data focus will be the Q1 GDP print. Recall yesterday's Q1 partials firmed some sell-side analysts’ expectations. The consensus sits at 0.7% for QoQ, 3.0% for YoY. There could also be focus on wages/earnings information from the GDP report.
- House price data already printed earlier today, dipping 0.3% for May, the first monthly decline since September 2020.
- From a technical standpoint the current bull theme persists. The resumption of gains put prices north of the 50-day EMA, at 0.7170 and has exposed resistance at 0.7266, the May 4/5 and a bull trigger. Support just below 0.7100 is evident at the 20-day EMA.
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US TSYS: A Touch Lower Early On In Asia
TYM2 takes a brief look below Friday’s low at the re-open, but lacks any real traction early on, last dealing -0-13 at 118-24.
- Weekend news flow hasn’t really impacted price action early on. Fresh source BBG reports pointing to the potential for European countries to propose a ban on Russia by the end of the calendar year (albeit with Hungary already outlining its desire to veto any such move) were evident over the weekend, in addition to tighter COVID restrictions in the Chinese capital city of Beijing (partially countered by positive developments surrounding COVID in shanghai). Softer than expected Chinese PMI data was also released over the weekend, with the breakdown of the data including soft demand metrics (plummeting inventory/order ratios), increased delivery times and inflation worry.
- To recap, the curve flattened in a bearish direction on Friday, with equities trading heavily (the S&P was down by over 3.5%, while the NASDAQ 100 shed over 4.0% in the wake of Apple & Amazon earnings and cautious guidance after hours on Thursday) and U.S. spending and employment cost data topping expectations (PCE inflation metrics were largely in line with expectations, as was the final UoM sentiment data, while the headline MNI Chicago PMI print expanded at a slower clip than expected), while there was a lack of meaningful month-end support evident late in the NY session. A couple of block sales of TU futures also helped the front-end to lead the way lower (-5K & -10K), while the OIS strip pricing in a 50/50 chance of a 75bp hike at the Fed’s June meeting added additional pressure. Benchmark Tsys were 10-12bp cheaper across the curve come the bell.
- There isn’t much in the way of major data/risk events slated for Asia-Pac hours, while liquidity will be limited by the observance of holidays in China, Hong Kong & Singapore, which will leave reaction to the weekend news flow, and any fresh headlines at the fore. A UK holiday will also thin out liquidity in European hours. Meanwhile, the latest ISM manufacturing survey headlines in U.S. hours, with the week set to be headlined by the latest FOMC decision (Wednesday) & NFP release (Friday).
AUSSIE 3-YEAR TECHS: (M2) Renewed Downside Pressure
- RES 3: 98.350 - High Mar 3
- RES 2: 97.975 - High Mar 16
- RES 1: 97.530 - High MAr 31
- PRICE: 97.045 @ 16:39 BST Apr 29
- SUP 1: 97.000 - Low Apr 22
- SUP 2: 96.952 - 3.0% Lower Bollinger Band
- SUP 3: 96.701 - 0.5% 10-dma envelope
Aussie 3yr futures remain pinned lower, putting prices again at cycle lows to test 97.000. This confirms an extension of the downtrend and the bearish price sequence of lower lows and lower highs. This keeps the focus pointed lower for now and attention is on 96.952 - the 3.0% lower Bollinger Band as well as 96.701. Key short-term resistance remains at 97.530, the Mar 31 high.
AUDNZD: Westpac: Could See Pullback Before Next March Higher
Westpac note that “following a 7c rally to NZ$1.1000, AUD/NZD has paused to consolidate. Such consolidation could see it slip to somewhere in the NZ$1.0650-1.0800 area, before embarking on the next rally which should exceed NZ$1.1000 towards NZ$1.1400 (which is model fair value at present). The global commodities rally is expected to remain a major source of support for the cross.”
