OIL: Crude Holds Onto Losses As Outlook Remains Highly Uncertain

The USD BBDXY index sits little changed in the first part of Tuesday dealing. The index last down a touch to under 1304. We are still above intra-session lows from Monday (sub 1300), which after reports that the incoming Trump administration would scale back its tariff plans (which was later denied). Yen and CHF have underperformed, while A$ and NZD have outperformed, leaving markets with a slight risk on feel in the FX space. 

• USD/JPY got to multi month highs of 158.42, but sits lower now, last near 158.00 (close to Dec 26 highs - 158.08). Comments from the Japan FinMin around excessive FX moves, prepared to act, tempered upside USD/JPY momentum. However, the remarks don't appear to represent an escalation on what has been said recently by Japan officials.
• A consolidated break above 158.00, could see 159.45 targeted (July 12 highs). Of course this would put us back in the mid 2024 intervention zone. There is also less sponsorship from US-JP yield differentials for this recent move higher in the pair, with yield differentials lower in the 2yr space and sideways for the 10yr.
• AUD/USD is up around 0.20%, last 0.6260, still sub intra-session highs from Monday ( just above 0.6300). It is a similar backdrop for NZD, up a little over 0.30% to 0.5660/65.
• Regional equities are mostly positive, except for Hong Kong/China, following US blacklisting of tech bellwethers, including Tencent. This hasn't impacted broader FX risk appetite though.
• A speech in Las Vegas from Nvidia's CEO, which focused in part on new graphics card, hasn't shifted aggregate US equity futures. We are around flat at this stage.
• US yields have ticked lower, likely leaning some pressure on the USD.
• Later the Fed’s Barkin speaks and US November trade, JOLTS job openings, December services ISM and preliminary December euro area CPI and November unemployment rate are released.

TYH5 is 108-18+, 0-01+ from NY closing levels. 

• According to MNI’s technicals team, the trend condition in 10-year futures remains bearish. Recent weakness reinforces the current bear cycle - the contract has traded through key short-term support and the bear trigger at 109-02+, the Nov 15 low. The breach confirms a resumption of the downtrend and opens 108.00, a Fibonacci projection. Short-term gains are considered corrective below the 109-10+ 20-day EMA.
• Cash bonds are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest bear-steepener.
• Tuesday’s US data calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.

ACGBs (YM -2.0 & XM -1.0) are slightly weaker in a relatively subdued Sydney session. 

• Outside of the previously outlined building approvals, there hasn't been much by way of domestic drivers to flag.
• Cash US tsys are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest bear-steepener. Tuesday’s US data calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.
• Cash ACGBs are 1bp cheaper with the AU-US 10-year yield differential at -14bps.
• Swap rates are 2-3bps higher.
• The bills strip has bear-steepened, with pricing flat to -6 across contracts.
• RBA-dated OIS pricing is flat to 4bps firmer, with late 2025 leading. A 25bp rate cut is more than fully priced by April (108%), with a February cut at a 58% chance.
• November CPI is released tomorrow and is likely to be watched closely ahead of Q4 data on January 29. It will also include more updates for services components than the October release. Bloomberg consensus is forecasting the headline to pick up 0.1pp to 2.2%. The trimmed mean was 3.5% the previous month.
• The local calendar shows retail sales and trade balances on Thursday.
• AOFM Bond issuance is expected to resume in the week beginning 13 January 2025.