NEW ZEALAND: 2024 Deficit Narrows As US Becomes Second Most Important Decision

• RES 3: 96.975 - High Mar 14 
• RES 2: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
• RES 1: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
• PRICE: 95.555 @ 15:55 GMT Dec 30
• SUP 1: 95.460 - Low Dec 20
• SUP 2: 95.275 - Low Nov 14
• SUP 3: 94.734 - 1.0% 10-dma envelope

Aussie 10-yr futures recovered well having slipped into the Monday close, undermining early December strength. This works against the previous short-term bull cycle. A continuation higher would refocus attention on resistance at the 96.207 level, a Fibonacci retracement. On the downside, a stronger bearish reversal would instead expose 95.275. 

TYH5 is 109-00+, +0-01+from NY closing levels. 

• US tsys finished near session bests on Monday following much weaker than expected Chicago PMI data. Chicago Business Barometer™, produced with MNI slipped 3.3 points to 36.9 in December. This is the third consecutive monthly decline, with the index at its lowest since May 2024, and below the 2024 average.
• Higher-than-expected pending new home sales (2.2% vs. 0.8% est) and a jump in Dallas Fed mfg index data (3.4 vs. -3.0 est) tempered US tsys support midmorning. The Mar'25 10Y contract traded around 108-30 (+16) through the second half, with the 10Y yield -.0806 at 4.5447% after the bell.
• Projected rate cuts into early 2025 gained momentum vs. Monday morning, levels (*) as follows: Jan'25 steady at -2.8bp, Mar'25 -14.6bp (-13.6bp), May'25 -20.6bp (-19.5bp), Jun'25 -30.3bp (-28.8bp).
• Reminder for Tuesday's session: Rate futures have full session (1600ET close) while cash Tsys close at 1400ET. Still no decision from the CME Group regarding the "day of mourning" in honor of Pres Carter on January 9, while stocks and Federal Gov is closed.
• There is no cash dealing in US tsys today with Japan out for a bank holiday. 

Oil prices were moderately higher on Monday in thin holiday-affected trading. There was a sharp rise in natural gas prices as temperatures are expected to drop in Europe & the US and crude followed, as it is also used as a heating fuel. Demand may increase if gas prices remain elevated. It also found support from technical indicators.

• WTI rose 0.8% to $70.99/bbl after reaching a high of $71.56 during US trading, the highest since early November. The benchmark is currently up around 5% this month but gains are seen as corrective. Initial support is at $66.01 and resistance at $71.97.
• Brent is up 0.4% to $74.10/bbl following a peak of $74.50. It is now 3.6% higher in December but almost unchanged on the year. The trend outlook remains bearish with the bear trigger at $67.85. Initial support is at $75.43, November 5 high.
• Algorithmic traders became net long Brent yesterday after being short since mid-October, according to Bridgeton Research and reported by Bloomberg.
• Oil prices have been range trading since October as concern over an expected 2025 surplus have been offset by geopolitics and OPEC’s delay to its output normalisation. There is currently a lot of uncertainty around the 2025 outlook due to the change in US administration and lack of details around planned China stimulus.