USDCAD TECHS: Bull Cycle Firms

• RES 4: 1.4019 38.2% retracement of the Feb 3 - Jun 16 bear leg  
• RES 3: 1.3925 High Aug 22 and the bull trigger
• RES 2: 1.3868 High Aug 26 
• RES 1: 1.3815 High Sep 02
• PRICE: 1.3798 @ 16:25 BST Sep 2
• SUP 1: 1.3722 Low Aug 7  
• SUP 2: 1.3709 61.8% retracement of the Jul 23 - Aug 22 bull cycle  
• SUP 3: 1.3658 76.4% retracement of the Jul 23 - Aug 22 bull cycle 
• SUP 4: 1.3637 Low Jul 25  

The bull cycle in USDCAD that started mid-June remains in play. However, the latest corrective pullback has resulted in a breach of support at the 50-day EMA, at 1.3775. A clear break of this handle signals scope for a deeper retracement and exposes 1.3722, the Aug 7 low. Moving average studies have recently crossed and are in a bull-mode position, highlighting an uptrend. The bull trigger has been defined at 1.3925, the Aug 22 high.

The Treasury cash curve bear steepened in the return from the Labor Day weekend Tuesday, taking the lead of global peers and shrugging off soft US data. 

• Treasuries took an early cue from overnight weakness in European and Japanese government bonds, which in turn was triggered by a combination of fiscal/ political/ supply factors.
• Europe (including UK) saw a record single day's issuance today per Bloomberg, just under EUR 50B. For good measure, Tuesday will have seen 58 investment-grade corporate bond offerings in the US, roughly $43.3B for a 2025 high (per Bloomberg) and narrowly exceeding last year's post-Labor Day sales.
• With UK and German 30Y yields hitting multi-year highs intraday, 30Y Tsys touched their highest levels since July 18 at a shade under the 5% mark (4.9966% session high).
• That move (around 830ET) would mark the intraday high for yields, with a smaller-than-expected improvement in the ISM Manufacturing index and continued weakness in construction spending (both out at 1000ET) helping keep a lid on yields through the rest of the session.
• Latest levels: The 2-Yr yield is up 3.1bps at 3.6474%, 5-Yr is up 3.8bps at 3.7339%, 10-Yr is up 4.5bps at 4.2731%, and 30-Yr is up 4.2bps at 4.9696%. Dec 10-Yr futures (TY) down 10/32  at 112-06 (L: 111-31 / H: 112-16)
• Friday's nonfarm payrolls report is the focus of the week. In the meantime, Wednesday's scheduled highlights include an appearance by St Louis Fed President Musalem (2025 FOMC voter, hawk), factory orders and JOLTS data, and the latest edition of the Fed's Beige Book.

The implied Fed funds path was little changed Tuesday, with Fed Funds futures implying roughly 23bp of cuts in September (ie 90+% probability of a 25bp rate cut two weeks from tomorrow).

• The incremental movement was in a hawkish direction, with about 2bp of cumulative cuts priced out of the path over the next year or so. Through next June there is 105bp of cuts implied, with 55bp through year-end (unch from Monday).
• There was a modest but notable pullback in expected cuts a little after 9am ET as the USD extended to session highs, before reversing on a soft ISM Manufacturing gain and unexpected Prices Paid pullback.
• One potential market-mover today, a decision in Fed Gov Cook's lawsuit to stop her firing, didn't materialize as the judge gave the Justice Department until Thursday to file another brief.
• Potential points of interes Wednesday include an appearance by FOMC voter Musalem, JOLTS job openings data, and the Fed Beige Book in the afternoon.