FOREX: Asia FX Wrap - Reasons For A USD Correction Mount
The BBDXY has had a range of 1211.64 - 1215.21 in the Asia-Pac session, it is currently trading around 1214.80. The BBDXY has opened higher this morning, breaking through the 1213.00 area in reaction to the US bombing and the implications of potential extended US involvement in the conflict. The Market is caught short USD’s and the reasons for a retracement are beginning to mount. Brian Sullivan on X: ”It's not just the price of oil that's a concern, but also the cost of SHIPPING oil. Oil Brokerage Ltd. tells me that VLCC (very large crude carrier) ship rates near Persian Gulf could hit $100/k per day if disruption in Straight of Hormuz. For comparison, it was $24k/day just 10 days ago.”
- EUR/USD - Asian range 1.1456 - 1.1508, Asia is currently trading 1.1495. EUR has rejected the move above 1.1600 but dips should continue to find demand, first support back towards the 1.1400 area then 1.1100/1200. Price action does suggest we could test the support, the EUR has outperformed against both the AUD and NZD in Asia.
- GBP/USD - Asian range 1.3400 - 1.3442, Asia is currently dealing around 1.3415. The GBP continues to hold just above its support around 1.3400 after failing to break the Weekly 1.35/36 pivot. A sustained move back below 1.3400 and we could see a deeper correction unfold.
- USD/CNH - Asian range 7.1799 - 7.1921, the USD/CNY fix printed 7.1710. Asia is currently dealing around 7.1875. Sellers should be around on bounces while price holds below the 7.2500 area and the PBOC manages the fix lower.
- Cross asset : SPX -0.25%, Gold $3360, US 10-Year 4.39%, BBDXY 1215, Crude oil $75.25
- Data/Events : Ger HCOB PMI's, FRA HCOB PMI's, EZ HCOB PMI's
Fig 1: GBP/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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JGB TECHS: (M5) Rallies off Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.40 @ 15:42 GMT May 23
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows and for now, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US FISCAL: Total Tariff Income Jumping In May As New Rates Hit
Treasury reported a record $16.5B in customs/excise taxes on May 22, reflecting the large increase in tariff rates that went into effect in April.
- Today's report is important because it represents the largest tariff collections of the month which are typically on a due date around the 22nd, when most corporate importers make their payments.
- Thursday's one-day collection is a record, and the month has already set a new record. Tariff revenues have totaled $22.3B so far in May, and are came in at $17.4B in April (after averaging $8.1B/month in 2024).
- For the fiscal year as a whole so far, customs duties have totaled just under $93B, per the Treasury Daily Statement.
US FISCAL: Extraordinary Measures Continue To Dissipate Alongside Treasury Cash
Treasury's latest estimate of the size of "extraordinary measures" available to use "in order to prevent the United States from defaulting on its obligations as Congress deliberate[s] on increasing the debt limit" is down to $67B on May 21 (of an available $299B), vs $82B a week earlier.
- The amount hit the 2nd lowest level since the debt limit impasse started, at $46B, on May 20 (the low was $34B on Feb 24).
- With $476B in cash in the Treasury General Account on May 21, that left the total resources available to Treasury at $543B, the least since April 14 - the day before the annual April 15 tax deadline.
- Treasury Sec Bessent warned Congress earlier this month that "there is a reasonable probability that the federal government's cash and extraordinary measures will be exhausted in August while Congress is scheduled to be in recess. Therefore, I respectfully urge Congress to increase or suspend the debt limit by mid-July".
