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US TSYS SUMMARY

Substantial Further Progress Not Yet Reached

USDCAD TECHS

Runs Counter to Trend

AUDUSD TECHS

Fed Bounce Stops Short

EURJPY TECHS

Bearish Trend Conditions

USDJPY TECHS

Bearish Threat

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Late on Monday CBA noted that "with Sydney and Melbourne in various states of lockdown, and the hit to the economy to be sharp, we see ACGB 10s trading at 1.00% (on a tactical horizon). The worsening outbreaks of Covid‑19 delta variant in Sydney has forced the city into an indefinite period of hard lockdown. Melbourne is also facing a shorter, but tough lockdown period. The shutting of the economy will have a rapid effect on economic activity. Once again, the real time data will be crucial in seeing this. Given the very slow roll out of vaccination, the risk of an extended period in non‑trivial. The markets won't wait for the data. They have been and will stay a step ahead, even if this means revising the timeline for rate hike expectations. But we have seen this playbook before. Governments throw money at the problem, with income support etc. Outlays rise, revenues fall and the issuance pipeline may be tweaked to accommodate this. This is the short-term trade. The RBA may delay its tapering if the outlook is bleak, or at least the market may look to price this even if there is no official or unofficial signal. What happens on the other side could be a repeat‑jobs and growth, but it could also take a little longer. To be clear, while our economics team flagged this risk last week, we are not seeking to go against their more optimistic medium to longer term outlook. We see these risks borne out in markets faster than data can show." CBA target 1.50% in 10-Year ACGB yields over a strategic horizon i.e. come March '22.