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Credit Agricole
Asia overnight
Sentiment was given a bump in Asia by several factors: (1) progress on the US debt ceiling with the Republicans offering the Democrats a temporary extension of the ceiling until December; (2) China’s technology stocks staged a rally; (3) Presidents Joe Biden and Xi Jinping have agreed to meet virtually; and (4) Russian President Vladimir Putin offered to ease the rise in European energy prices by exporting more gas. This would be made easier by a speedy approval of Nord Stream 2 gas pipeline Russia’s Deputy Prime Minister Alexander Novak said. Most Asian bourses and S&P500 futures were trading in the green at the time of writing. The reaction to risk-on trading in G10 FX was modest with the AUD leading modest gains against a weaker USD and JPY.
CIBC
FX Flows
AUDNZD looking fairly bid this morning as yield spreads of AU-NZ bonds continue to narrow, high in the cross is 1.0530, some initial resistance at 1.0540 then 1.0618. In our FX Weekly, Patrick Bennett said we see the current AU-NZ 10s spread of around -50 bps as near the limit of retracement expected. AUDNZD can edge slightly firmer, but expect it capped by technical resistance between 1.0550-1.0600. We recommend to be sellers of the cross ahead of 1.0550, targeting a revisit to the previous lows near 1.0300.
Both AUDUSD and NZDUSD have been slow, with risk being put on AUDUSD ended the session touch higher, thanks to AUDJPY. Small offers are mentioned from 0.7300 to 0.7320, better at 0.7360. Strikes maturing tomorrow, 0.7300 for near AUD1bn and 0.7335 for AUD1.75bn. Next week we will have the Australia September business confidence followed by September labour report.
Oil futures are calm this morning, WTI November contracts slipped to $76.67. Overnight hint by Russian President Putin that Gazprom may increase supplies to help Europe avert energy crisis. There was also an FT article which reported US Energy Sec Granholm raising the prospect of releasing crude oil from government’s strategic petroleum reserve. USDCAD paid no attention to oil prices, the pare continue to slide, I think we will look for break of 1.2555 and then 1.2495. There are plenty of mid-sized option strikes due tomorrow. We will also have the Sept Canadian labour report, market is looking for improvement in the unemployment rate to 6.9% from 7.1%, higher hourly wage rate of +1.8% from +1.2%.
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