AUSSIE BONDS: Firmer Overnight
The bullish steepening impulse observed in the wider core global FI space supported Aussie bond futures in post-Sydney dealing, leaving YM +12.5 & XM +7.5 shortly after the Sydney re-open, a touch above late overnight levels, but shy of their respective overnight peaks. It is a similar story when we look at the Bill strip, which trades 5-15bp richer through the reds,
- The latest CoreLogic house price reading saw a 0.8% fall in M/M terms, the second consecutive monthly fall as tighter financial conditions start to weigh on Australian property prices.
- The final m’fing PMI print headlines the domestic economic today, although it isn’t usually a market mover. Note that the release of the Chinese Caixin m’fing PMI will provide a focal point from further afield. We will also get the release of the AOFM’s weekly issuance slate.
- Participants will already be focusing on the setup into next week’s RBA decision, with 44bp of tightening priced into the IB strip, while the sell-side consensus looks for a 50bp hike.
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NZD: Bearish Outside Day
NZD/USD went offered Tuesday, as U.S. Tsys retreated when cash trading re-opened in Tokyo after a long weekend in the U.S. Struggling equity markets in Europe and the U.S. applied further pressure to the pair. NZD/USD snapped a four-day winning streak as a result, charting a bearish outside candlestick.
- The rate last deals at $0.6518, barely changed on the day. A slide through May 24 & 25 lows of $0.6423 would encourage bears to take aim at May 18 low of $0.6291. Conversely, should the rate manage to break above May 5 high of $0.6568, bulls could target the $0.6600 mark.
- NZ housing market continues to cool, CoreLogic House Price Index showed. CoreLogic noted that "with housing credit tight and getting more expensive by the week, this trend towards weaker housing market conditions is likely to continue."
- The RBNZ has launched consultations on the five-yearly review of its monetary policy remit, noting that it seeks feedback on the appropriateness of the 1-3% inflation target and using the CPI as the main indicator of inflation.
- NZ PM Ardern met U.S. Pres Biden in the White House to discuss the Ukraine situation, the Pacific region, the Indo-Pacific Economic Framework (IPEF) and climate change.
- RBNZ Asst Gov Hawkesby will make another presentation on the MPS today. China's Caixin M'fing PMI & Australian GDP will be eyed for any spillover into NZ markets.
- Looking further afield, New Zealand's terms of trade will hit the wires on Thursday, with completed construction work coming up Friday.
AUSSIE 10-YEAR TECHS: (M2) Trading At Its Recent Highs
- RES 3: 97.455 - High Mar 18
- RES 2: 97.185 - High Apr 5
- RES 1: 96.945 - High Apr 26 and key short-term resistance
- PRICE: 96.605 @ 15:51 BST May 31
- SUP 1: 96.330 - Low May 10
- SUP 2: 96.200 - 3.0% Lower Bollinger Band
- SUP 3: 96.124 - 0.5% 10-dma envelope
Aussie 10yr futures are drifting away from recent highs. This keeps the primary trend pointed down. MA studies continue to highlight a bearish backdrop and recent weakness has maintained a bearish price sequence of lower lows and lower highs - the definition of a downtrend. A resumption of weakness would open 96.200 - the 3.0% lower Bollinger Band as well as 96.124. Key short-term resistance remains at 96.945, the Apr 26 high.
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.
