CNH: USD/CNH Holding Above 100-day EMA, Tariff Concerns Offset Lower US Yields

• Tsys futures closed higher on Monday, following a strong haven bid as equities in particular tech stocks were hit hard with the NASDAQ down 3%, and NVIDIA falling 17%. Yields across many maturities closed at YTD lows, while the 2 & 5yr auctions were well received. TU closed +0-04⅞ at 102-29, while TY closed +0-22 at 109-05, with futures volumes more than 40% above the 20-day averages
• Cash tsys curves closed mixed, the belly has outperformed with the 7yr closing -9.3bps at 4.443%, while the 10yr is -8.7bps at 4.534%. The 2s10s closed -2bps at 33bps, while the 5s10s closed +0.5bps at 19.50bps.
• December's pickup in new home sales was larger than expected, reaching 698k (675k expected) on an seasonally-adjusted annualized rate basis, up from 674k in November (revised up from 664k).
• Fed-dated OIS contracts priced in a more dovish Fed, anticipating 50bp of easing by the end of this year vs 40bp at Friday’s close.
• Projected rate cuts through mid-2025 regain traction vs. late Friday (*) levels as follows: Jan'25 at -0.7bp (-0.1bp), Mar'25 at -8.3bp (-6.9bp), May'25 at -15.9bp (-13.6bp), Jun'25 at -27.9bp (-24.7bp), Jul'25 at -33.7bp (-28.6bp).
• Focus remains on Wednesday's FOMC policy annc, no move expected, as well as a heavy slate of corporate earnings later today: PACCAR, Sysco Corp, Synchrony Financial, Lockheed Martin Corp, Veradigm, Royal Caribbean, Polaris Inc., Boeing, NextEra Energy, JetBlue Airways, General Motors, Kimberly-Clark Corp, Invesco, Starbucks, Qorvo and Stryker Corp.

ACGBs (YM +8.0 & XM +7.5) are sharply stronger as trading resumes after the Australia Day long weekend. 

• Yesterday, US tsys finished 7-9bps richer after holding gains seen in yesterday’s Asia session as Chinese AI startup DeepSeek shook the broader market.
• The focus remains on Wednesday's FOMC policy announcement, no move is expected.
• Cash ACGBs are 8bps richer with the AU-US 10-year yield differential at -14bps.
• Swap rates are 6-7bps lower.
• The bills strip has bull-flattened, with pricing +3 to +7.
• Tomorrow’s Q4 CPI data could be pivotal in determining whether the RBA initiates a long-anticipated monetary easing cycle. It may also influence the timing of an election, which must be held by May 17. Economists predict the trimmed-mean CPI will have declined to 3.3%, marking its lowest level in three years.
• RBA-dated OIS pricing is 1-6bps softer across meetings today. A 25bp rate cut is more than fully priced for April (123%), with the probability of a February cut at 77% (based on an effective cash rate of 4.34%).
• Today, the local calendar will see NAB Business Confidence.
• The AOFM plans to sell A$300mn of the 4.75% 21 June 2054 bond today.  The AOFM also plans to sell A$800mn of the 2.50% 21 May 2030 bond on Friday. 

USD/JPY's pull back got as far as 153.72 on Monday. We track near 154.45/50 in early Tuesday dealings, after yen rose nearly 1% for Monday's session, comfortably the best G10 FX performer. Equity risk off, led by US tech plays, amid fresh AI competition from China, saw yen and the Swiss franc outperform in the G10 FX space. 

• For USD/JPY technicals, the pair closed Monday trade below its 50-day EMA, which intersects today at 155.15. This would represent the first close below this average since December 09 and is a meaningful bearish development technically. This paves the way for an extension towards 152.55, a Fibonacci retracement point, and 151.81, the Dec 12 low.
• The Nasdaq lost just over 3%, the SPX down close to 1.5%. The US VIX index spiked to 22.51%, but finished up under 18%. US yields plunged amid the flight to safety, off around 7-9bps across the Tsy curve.
• Focus today will remain tech related equity fallout, although a number of Asian markets, including China, are closed for LNY celebrations.
• Locally on the data calendar today we have the Dec PPI services print. The market expects a 3.2%y/y outcome (prior was 3.0%). Later on, machine tool orders come out.