MNI US MARKETS ANALYSIS - AUD on Top as Job Gains Double Forecast

US TSYS: Extending Lows After Early London Pressure

• Cash Tsys are solidly cheaper as the US comes in, having come under pressure alongside the wider core global FI space in the early London morning, with flow as opposed to headlines at the fore.
• A continuation of yesterday’s sell-off, it sees 2Y yields at 4.82% close the gap on pre-CPI levels just marginally above 4.85% for a significant move off last week’s low of 4.605%. A solid docket ahead, with jobless claims, existing home sales and 10Y TIPS supply likely headlining along with further pre-market earnings including Johnson & Johnson and Philip Morris.
• 2YY +5.6bp at 4.822%, 5YY +6.2bp at 4.047%, 10YY +4.5bp at 3.793% and 30YY +2.6bp at 3.865%
• TYU3 pushes new session lows of 112-17 (-15) back to Monday levels, albeit on subdued volumes of just 230k. Support is seen at 112-07+ (Jul 13 low), whilst a more concerted push lower could open 111-03+ (Jul 11 low).
• Data: Weekly jobless claims (0830ET), Philly Fed mfg outlook Jul (0830ET), Existing home sales Jun (1000ET), Leading index Jun (1000ET)
• Note/bond issuance: US Tsy $17B 10Y TIPS auction (91282CHP9)
• Bill issuance: US Tsy $70B 4W, $60B 8W bill auctions

STIR FUTURES: Fed Implied Rates Have Mostly Unwound Reaction To CPI Miss

• Fed Funds implied rates have continued to push higher overnight, with pricing for Jul and Sep meetings higher than just before last week’s CPI miss. Nov and Dec have also essentially closed the gap whilst 2024 meetings are within 4bps (a suspect print for Dec’24 aside) – see below table for details.
• Cumulative hikes from 5.08% effective: +24bp Jul (unch), +28bp Sep (+1bp), +33bp Nov to terminal 5.415% (+1.5bp).
• Cuts from Nov terminal: 5bp to Dec’23 (from 6bp yesterday), 67bp to Jun’24 (from 71bp) and 136bp to Dec’24 (from 148bp). Note the Dec’24 currently showed +13bps on the day vs +6.5-7bps for both Sep and Nov meetings.

EUROPE ISSUANCE UPDATE

• E1.686bln of the 2.80% May-26 Bono. Avg yield 3.303% (bid-to-cover 2.16x).
• E1.677bln of the 1.40% Apr-28 Obli. Avg yield 3.137% (bid-to-cover 1.59x).
• E1.576bln of the 3.90% Jul-39 Obli. Avg yield 3.726% (bid-to-cover 1.41x).
• E1.502bln of the 1.00% Oct-50 Obli. Avg yield 3.755% (bid-to-cover 1.72x)

• E6.168bln of the 2.50% Sep-26 OAT. Avg yield 3.05% (bid-to-cover 2.57x).
• E2.48bln of the 0.75% May-28 OAT. Avg yield 2.85% (bid-to-cover 2.45x).
• E3.349bln of the 2.75% Feb-29 OAT. Avg yield 2.86% (bid-to-cover 2.55x).

FOREX: AUD on Top as Employment Change Surges Ahead of Expectations, U/E Rate Drops

• AUD trades firmly, outperforming all others in G10 following the solid June jobs report. Australia added 32.6k jobs across the month, doubling market expectations. This helped pressure the unemployment down to 3.5%, which also saw the previous outturn revised lower. AUD/NZD erased yesterday's losses in response, rallying to test yesterday's highs at 1.0885 and returning above the 100- and 50-dmas.
• The USD Index remains weak and has staged only a lacklustre bounce off the July lows despite receiving some underlying support from the front-end of the US yield curve. US 2y yields have added close to 20bps off the post-CPI lows, hitting new recovery highs ahead of the NY crossover today.
• GBP is softer for a second session, extending the reaction to the lower-than-expected UK inflation release posted yesterday morning. EUR/GBP is yet to challenge yesterday's highs of 0.8701, which looks like firm resistance ahead of the 100- and 200-dmas of 0.8704 and 0.8730.
• Lastly. USD/CNH showed a little more than 600 pips below its Wednesday high in Asia-Pac hours, as the redback benefitted from a much stronger-than-expected lean in the USD/CNY mid-point fixing (resulting in a 680-pip mid-point/BBG survey differential, the widest spread seen since last year’s yuan tumult). The PBoC also tweaked limits to allow companies to borrow more overseas, opening the door to the potential for an uptick in capital inflows, providing further support to the yuan.
• Highlights of the session ahead include weekly US jobless claims data as well as existing home sales for June. Advance Eurozone consumer confidence data is also set to cross, however no central bank speakers are due.

FX OPTIONS: AUD/USD Spot Range Straddles Sizeable Strike for Thursday Cut

• EUR/USD: $1.1110(E796mln), $1.1190-00(E1.3bln), $1.1300(E592mln)
• USD/JPY: Y140.00($1.9bln)
• AUD/USD: $0.6800-15(A$2.1bln)
• NZD/USD: $0.6310(N$1.1bln)
• USD/CAD: C$1.3105($680mln)
• USD/CNY: Cny7.2000($2.5bln)

EQUITIES: E-Mini S&P RSI Tips into Overbought Territory

• Eurostoxx 50 futures traded higher last week. The rally resulted in a move above the 50-day EMA at 4335.00 and price is through 4371.00, the Jul 6 high. Clearance of this latter level highlights a potentially stronger bull cycle and attention is on key resistance and the bull trigger at 4447.00, the Jul 3 high. Key support and the bear trigger has been defined at 4220.00, the Jul 7 low. Initial support is at the 50-day EMA.
• The rally accelerated in E-Mini S&P further still Wednesday, with prices surging through the top-end of the bull channel drawn off the March 13th low at 4608.50. This marks another positive shift for S/T momentum and clears the way for a test of the March 29th 2022 high at 4631.00 and - ultimately - all time highs. Nonetheless, the RSI has now tipped into overbought territory, signalling a slowing of the uptrend could dominate to alleviate the condition over the coming few sessions. Any corrective pullback would initially target the 20-day EMA at 4482.32 for support.

COMMODITIES: Gold Prints Fresh Cycle High Early Thursday

• WTI Futures prices bounced off the Monday lows and added to gains Wednesday, although amid-session bounce wasn't sustained, putting markets flat into the close. The current bull cycle remains intact for now after the recent breach of $72.72,the Jun 21 high. Last Wednesday's move higher resulted in a break of key resistance at $75.70, the Jun 5 high as well as the 200-dma. This strengthens current bullish conditions and paves the way for a climb towards $78.03, a Fibonacci retracement point. Key short-term support has been defined at $66.96, the Jun 12 low. Initial support is at $72.31, the 20-day EMA.
• Gold shows at a new cycle high early Thursday, adding to recent gains and topping key resistance at 1985.3, the May 24 high. A close above here could presage a stronger reversal higher. Strength follows the break of the 50-day EMA at 1948.3. The break signalled scope for a continuation of the current corrective cycle. This opens $1968.00, the Jun 16 high. Key support and the bear is at $1893.1, the Jun 29 low.