RBA: MNI RBA Review-February 2025: Cautious Easing, Not In A Hurry

• RES 3: 147.74 - High Jan 15 and bull trigger (cont)
• RES 2: 146.53 - High Aug 6 
• RES 1: 142.73/144.48 - High Dec 9 / High Nov 11  
• PRICE: 141.11 @ 16:39 GMT Jan 20
• SUP 1: 140.00 - Round number support
• SUP 2: 139.38 - 2.764 proj of the Aug 6 - Sep 3 - 9 price swing
• SUP 3: 138.87- 3.000 proj of the Aug 6 - Sep 3 - 9 price swing    

A clear downtrend in JGB futures remains intact and the latest fresh cycle lows reinforce this condition. Note too that moving average studies on the continuation chart are in a bear-mode setup, highlighting a clear downtrend. The move down exposes the 140.00 psychological handle next. For bulls, a reversal would open 142.73 and 144.48, the Dec 9 and Nov 11 high respectively. For now, short-term gains are considered corrective. 

Business NZ/BNZ’s performance of services index fell to 47.9 from 49.1 but the Q4 average was still 2 points higher than Q3 at 47.7 signalling that the sector contracted at a slower rate in the final quarter of 2024. All components remain under 50 though signalling continued services weakness, as is the case with manufacturing too.

• The December drop was driven by activity, inventories and supplier deliveries. Orders were stable just below the breakeven-50 level, while employment rose 0.7 points to 47.4 (highest since August).
• Businesses remain concerned about the cost of living and the weakness in the economy. The share of negative comments in December rose to 57.5% up from 53.6% but still lower than October’s 59.1%.
• BNZ notes that the PSI remains below Australia’s services PMI, which is just in growth territory at 50.8. 

NZ PSI vs PMI manufacturing

• It was a holiday impacted start to the week, with no cash trading, while futures closed early. Future did however close slightly higher across all contracts, with TY closing near session highs, up 05+ at 108-23. The move higher was helped from the WSJ reporting Trump would stop short of imposing new tariffs on day one.
• Futures are opening higher in Asia this morning, with TY now +12 at 108-29+ and trading through resistance of 108-27+, next resistance is seen at 109-06 (Dec 31 high) but gains are deemed corrective from a technical perspective, against a medium-term bear trend with support at 108-00 (Jan 16 low). It earlier saw a low of 108-08+.
• There was little by way of details behind “we will tariff and tax foreign countries to enrich our citizens” and his speech contained few surprises.
• Fed Funds futures meanwhile have seen cut expectations build during the US session to 40bp for 2025 (again, all after the WSJ report) vs 38bp at the US crossover on Monday and 32bp prior to last week’s CPI report. A next 25bp cut from the FOMC is seen around June/July.
• It is another quiet data session today with just Philadelphia Fed Non-Manufacturing Activity expected out.