EURUSD TECHS: Approaching Parity
- RES 4: 1.0615 High Jun 27 and a key resistance
- RES 3: 1.0556 Bull channel resistance drawn from the Feb 10 high
- RES 2: 1.0359/0414 Low Jun 15 / 20-day EMA
- RES 1: 1.0221 High Jul 7
- PRICE: 1.0079 @ 15:48 BST Jul 11
- SUP 1: 1.0042 Low Jul 11
- SUP 2: 1.0009 Bear channel base drawn from the Feb 10 high
- SUP 3: 1.0000 Parity and a key psychological support
- SUP 4: 0.9944 1.618 projection of the Jun 9 - 15 - 27 price swing
EURUSD trend conditions remain bearish and the pair continues to trade closer to its recent lows. Weakness last week resulted in a break of 1.0350, May 13 low, to confirm a resumption of the primary downtrend. The move lower also highlights an acceleration of the bear cycle. The focus is on 1.0009, the base of a channel drawn from the Feb 10 high, just ahead of parity. Firm resistance is seen at 1.0414, 20-day EMA.
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US: Def Sec Austin Delivering Remarks On Indo-Pacific Strategy
20:30 ET 01:30 BST: US Defence Secretary Lloyd Austin is continuing his ten-day tour of Asia with a speech at the IISS Shangri-La Dialogue in Singapore outlining "Next Steps for the United States' Indo-Pacific Strategy."
- The Secretary's speech will be livestreamed on the Pentagon website: https://www.defense.gov/News/Live-Events/
- Today, Austin met with Chinese counterpart Wei Fenghe to discuss "the need to responsibly manage competition and maintain open lines of communication."
USDCAD TECHS: Cements Short-Term Reversal
- RES 4: 1.3077 High May 16 and the bull trigger
- RES 3: 1.2982 High May 16
- RES 2: 1.2896 High May 18 and a key resistance
- RES 1: 1.2813 High Jun 10
- PRICE: 1.2792 @ 16:01 BST Jun 10
- SUP 1: 1.2518 Low Jun 8
- SUP 2: 1.2459 Low Apr 21
- SUP 3: 1.2403/02 Low Apr 5 and key support / 2.0% 10-dma env
- SUP 4: 1.2387 Low Nov 10. 2021
A sharp rally in USDCAD continued Friday, cementing the short-term reversal. Key near-term support has been defined at 1.2518, the Jun 8 low. An extension higher would signal potential for a climb towards resistance at 1.2896, the May 19 high. For bears, a resumption of weakness and a breach of 1.2518 would again expose 1.2459, Apr 21 low and 1.2403 further out, the Apr 5 low and a key support.
US TSYS: Hot CPI, 2Y Yld Over 3% First Time Since 2008
Rates extend lows after May CPI came out higher than est at 1.0% vs. 0.7% est, unrounded 0.974%, core 0.631%. Heavy short end selling on inflation surge has market expecting Fed to hike US into a recession.
- Notably, 2Y yield surged to 3.0611% - the highest level since 2008, while curves bull flattened after some initial volatility in the long end: 2s10s at 9.858 (-12.786) vs. 9.421 low, 5s10s inverted, flattening -7.273 at -9.761 vs. -10.722 low, while 5s30s slipped to inverted low of -6.661.
- Reaction spurred several dealers to up their rate hikes estimates with Barclays now sees a 75bp Fed hike next week. They have also raised their forecast for the terminal rate by 25bp to 3.00-3.25% in early 2023, implying 150bp of hikes after June's meeting. That's the most aggressive June FOMC hiking call that we are aware of, but markets are pricing in a modest chance of such a surprise (15-20% probability per futures).
- GS upped they're hike forecast to 50bp in June, July and September (from 50bp in Jun/Jul and 25bp in Sep).
