US TSYS: Belly Outperforms As September Fed Cut Gets Fully Priced

• Treasuries held a narrow range finishing near steady/mixed Monday, focus on Tuesday's June CPI inflation data and several Fed speakers ahead of Friday evening's policy blackout.
• Consensus sees core CPI inflation at a seasonally adjusted 0.3% M/M in June on a rounded basis, but with sizeable risk of undershooting at 0.2% (MNI median unrounded estimate at 0.24% M/M /average 0.25%).
• Unscheduled Fed speaker: Cleveland Fed President Hammack (non-2025 voter, hawk) reiterated her patient approach to any future policy easing in an interview with Fox Business Monday. Hammack had previously cited a wide range of estimates of neutral rates from 2% to 4.6%.
• Currently, the Sep'25 10Y contract trades +2 at 110-25 (110-20 low / 110-29.5 high), inside technicals: support at 110-17 (61.8% of the May 22 - Jul 1 bull leg); resistance above at 111-13+/111-28 (High Jul 10 / High Jul 3).
• The Washington Post reported Monday that National Economic Council director Kevin Hassett is "emerging as a leading contender to become the next chair of the Federal Reserve, according to people who have discussed the matter with White House officials".
• The latest earnings cycle with banks and financial stocks reporting tomorrow: Blackrock, JPMorgan Chase & Co, Wells Fargo & Co, Bank of New York Mellon, State Street Corp and Citigroup.

• Whilst it’s likely that upcoming months are still to see larger impacts from tariffs (see more on this in the MNI US CPI Preview, here), there were still signs of an impact within the details of last month’s May release.
• Core goods prices surprisingly fell -0.04% M/M vs analyst median expectations 0.2% M/M in May, helped by pronounced weakness in heavily weighted components such as used cars (-0.5%), new cars (-0.3%) and apparel (-0.4%).
• However, the median increase across 56 core goods items was 0.29% M/M after -0.01% M/M in April, its strongest since Sep 2022. 

• When assessing tariff impacts, we continue to expect greatest focus on those with a China-heavy affiliation, such as toys, cell phones, broad electrical/computing equipment and apparel despite the de-escalation in US-China trade policy on May 12 after Geneva talks when tariffs imposed by the US in 2025 were reduced from 145% to 30%. 

  

• RES 4: 0.6700 76.4% retracement of the Sep 30 ‘24 - Apr 9 bear leg
• RES 3: 0.6688 High Nov 7 ‘24
• RES 2: 0.6603 High Nov 11 ‘24
• RES 1: 0.6595 High Jul 11 
• PRICE: 0.6556 @ 16:09 BST Jul 14
• SUP 1: 0.6534 20-day EMA
• SUP 2: 0.6485/6373 50-day EMA / Low Jun 23 and a reversal trigger
• SUP 3: 0.6357 Low May 12
• SUP 4: 0.6275 Low Apr 14

The trend set-up in AUDUSD is unchanged, it remains bullish and last week’s gains reinforces current conditions. Resistance at 0.6590 has been pierced. A clear break of this price point would confirm a resumption of the uptrend and maintain the price sequence of higher highs and higher lows. Scope is seen for a climb towards 0.6603 next, the Nov 11 2024 high. Initial firm support to watch is 0.6485, the 50-day EMA.