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CIBC
FX Flows
New Zealand July trade balance turned to deficit of NZD402mio. 12-month YTD deficit widened to NZD1.1bn. Exports lower and imports up. Revisions for June were all touch lower. NZDUSD came off like 5 ticks to 0.6948. After the data, yield spreads of AU-NZ bonds have narrowed. There were some demand for the Tokyo fix but soon eased after that. Spreads between AU-NZ yield have narrowed, little to comment on the cross. NZDJPY eased in the late morning, pressing the NZDUSD towards 0.6935.
Goto-bi Day and JPY crosses were bought. USDJPY rose to 109.85, small pullback to 109.78 but the USD stayed bid. We continue to hear that Japanese retail day traders have been seen adding to long positions and suspect they will continue to do so. Also, importers lining up bids below 109.20. Daily support at 109.33. Topside resistance near 109.90. For option expiries, about $500mio at 109.50 and more than $1bn surrounds 109.85-90.
New South Wales reported record high of new Covid-19 cases of 919, Victoria has 45 and ACT has 9.Queensland Premier Palaszczuk announced a pause on arrivals from New South Wales, Victoria and the ACT into Queensland. In today’s AUDUSD price action, it was all about the crosses, especially AUDJPY. The cross peaked ahead of 79.70 and then eased back towards low 79.50s. Our trader thinks we might get a chance to rip out some weak stops very nearby below.
Citi
Asia FX on the back foot again this morning as market turns cautious ahead of Jackson Hole. Asia equities opened higher but erased earlier gains with HSI down -0.36% by noon. China 10y bond yield slipped below 2.85% amid cash injection by PBoC in the morning to smooth month-end liquidity condition, cnh t/n funding traded below 5pips per day with forward curve also trading in heavy tone.
Elsewhere, HKD outperforms the rest of the Asia complex after HKMA lifted exchange fund bills issue size which prompted sell-off in spot as HKD liquidity tightened. Trading reckons we could see more profit-taking coming through in spot amid medium-term equity rebounds. Looking ahead, we have BoK meeting tomorrow where our econ team continues to expect a 25bps hike but bringing forward the timing of its second hike call to November 2021 from Jan 2022 previously.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.