US TSYS: Bear Steeper, JOLTS and Jefferson Watched Amidst Headlines
- Treasuries have bear steepened today, with the front-end somewhat pinned by Fed rate expectations ahead of today’s data including the JOLTS report for December but with the longer end extending a sell-off seen after the US delayed tariffs on Canada following similar developments for Mexico earlier in the day.
- The deadline for setting 10% tariffs on China has passed and China has since announced targeted retaliatory measures of its own due to be effective Feb 10, leaving scope for negotiations.
- Cash yields are 0.6-2.7bp higher, with 20s leading the increase.
- 2s10s has pushed to 32.4bps (+1.4bp) but remains below Friday’s 35bps prior to the original Feb 1 tariff deadline.
- TYH5 sits at 108-25 off earlier lows of 108-23. Cumulative volumes of 375k are reasonable but far from yesterday’s outsized 770k at the same time of day.
- A corrective cycle remains in play and the contract is holding on to the bulk of its recent gains. Key resistance at 109-10 (50-day EMA) has been pierced. A clear break would strengthen a bullish theme and open 109-31 (Dec 18 high). The medium-term trend condition remains bearish, with initial firm support seen at 108-06 (Jan 23 low).
- Data: JOLTS Dec (1000ET), Factory orders Dec (1000ET)
- Fedspeak: Bostic (1100ET), Daly (1400ET) and Vice Chair Jefferson on the economic outlook and mon pol (1930ET, incl text). An addendum for Jefferson who we missed in the earlier STIR comment, his prepared remarks are worth watching having last spoken on Oct 9. We’ve previously seen him as on the dovish side of the spectrum but a lot has changed since then.
- Bill issuance: US Tsy $85B 42D CMB auction (1130ET)
- See our take on yesterday’s borrowing estimates, including how requirements were at the low end of expectations (here) and cash level assumptions are subject to downside risk (here).
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JGB TECHS: (H5) Returns Lower
- RES 3: 149.55 - High Mar 22 (cont)
- RES 2: 147.74 - High Jan 15 and bull trigger (cont)
- RES 1: 144.48/146.53 - High Nov 11 / High Aug 6
- PRICE: 142.12 @ 15:01 GMT Jan 03
- SUP 1: 141.65 - Low Dec 30
- SUP 2: 141.56 - 1.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 141.05 - 2.000 proj of the Aug 6 - Sep 3 - 9 price swing
Markets slipped on the hawkish Fed and are yet to fully recover, touching 141.65 on the way lower. Medium-term trend signals on the continuation chart continue to point south. A resumption of the trend would pave the way for a move towards 141.56, a Fibonacci projection point on the continuation chart. A stronger recovery would open 144.48, the Nov 11 high. Further out, key resistance is at 146.53, the Aug 6 high (cont).
USDCAD TECHS: Bull Flag Highlights A Clear Uptrend
- RES 4: 1.4669 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4392 @ 15:50 GMT Jan 3
- SUP 1: 1.4336 Low Dec 20
- SUP 2: 1.4307/4232 20-day EMA / Low Dec 17
- SUP 3: 1.4136 50-day EMA
- SUP 4: 1.4011 Low Dec 5
USDCAD is unchanged and bulls remain in the driver’s seat. The latest pause appears to be a flag formation - a bullish continuation signal. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4307, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Southbound
- RES 4: 0.6471 High Dec 9
- RES 3: 0.6408 50-day EMA
- RES 2: 0.6341 High Dec 18
- RES 1: 0.6247/6282 High Dec 30 / 20-day EMA
- PRICE: 0.6204 @ 15:21 GMT Jan 3
- SUP 1: 0.6179 Low Dec 31
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
A bearish trend condition in AUDUSD remains intact and the pair continues to trade closer to latest lows. Recent weakness maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. Scope is seen for an extension towards 0.6158 next, a Fibonacci projection. Initial firm resistance to monitor is 0.6282, the 20-day EMA.
