US TSYS: Bull Steeper As Powell Describes 75bp Hikes As "Unusually Large"
Treasury markets took a dovish interpretation from June's FOMC meeting, with diminished rate hike pricing for the July meeting and a decision (+75bp) and Dot Plot that were in line with expectations.
- The curve flattened sharply a minute or two after the FOMC decision was released, with 2s10s temporarily going negative.
- But ultimately it resolved much steeper as Fed rate hike pricing pared back during Powell's press conference.
- The main trigger to this was Powell's comment early in the presser that the next meeting in July could bring a 50 or 75bp hike - and that a 75bp hike was unusually large and that he didn't expect them to be common.
- 2-Yr yield is down 21.3bps at 3.2138%, 5-Yr is down 20.1bps at 3.3858%, 10-Yr is down 17bps at 3.3029%, and 30-Yr is down 8.9bps at 3.3353%.
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AUSSIE 3-YEAR TECHS: (M2) Corrective Recovery
- RES 3: 98.350 - High Mar 3
- RES 2: 97.975 - High Mar 16
- RES 1: 97.530 - High Mar 31
- PRICE: 97.040 @ 20:49 BST May 16
- SUP 1: 96.675 - Low May 4 and the bear trigger
- SUP 2: 96.527 - 3.0% Lower Bollinger Band
- SUP 3: 96.412 - 0.5% 10-dma envelope
The primary trend direction in Aussie 3yr futures remains down. The recent recovery is likely a correction. A bearish price sequence of lower lows and lower highs, that defines a downtrend, remains intact. Moving average studies are also pointing south. Attention is on 96.527 - the 3.0% lower Bollinger Band as well as 96.412, the lower band of a moving average envelope. Key short-term resistance remains at 97.530, the Mar 31 high.
EURJPY TECHS: Head And Shoulders Reversal
- RES 4: 141.06 High Jun 4 2015 and a key resistance
- RES 3: 140.87 0.50 proj of the Mar 7 - 28 - Apr 5 price swing
- RES 2: 138.32/140.00 High May 9 / High Apr 21 and the bull trigger
- RES 1: 135.05/136.75 INtraday low / High May 12
- PRICE: 134.71 @ 20:20 BST May 16
- SUP 1: 132.66/42 Low May 12 / 3.0% 10-dma envelope
- SUP 2: 132.36 100-dma
- SUP 3: 132.20 50% retracement of the Mar 7 - Apr 21 bull phase
- SUP 4: 131.59 Low Mar 22
EURJPY fell sharply on May 12 and remains vulnerable. The move lower last week marks an extension of the reversal from Apr 21. The cross has breached a number of important support levels, clearing the 50-day EMA, and the Apr 5 low of 134.30. Furthermore, the move lower highlights a head and shoulders reversal pattern. A bearish extension would open 132.36 initially - the 100-dma. Initial resistance is 136.75, May 12 high.
AUSSIE 10-YEAR TECHS: (M2) Primary Trend Remains Down
- RES 3: 97.455 - High Mar 18
- RES 2: 97.185 - High Apr 5
- RES 1: 96.945 - High Apr 26 and key short-term resistance
- PRICE: 96.615 @ 20:38 BST May 16
- SUP 1: 96.330 - Low May 4
- SUP 2: 96.120- 3.0% Lower Bollinger Band
- SUP 3: 96.015 - 0.5% 10-dma envelope
Aussie 3yr futures remain in a downtrend although the contract has undergone a minor recovery rally from its recent low of 96.330 on May 10. Moving average studies continue to highlight a bearish backdrop and recent weakness has maintained a bearish price sequence of lower lows and lower highs. Attention is on 96.120 - the 3.0% lower Bollinger Band as well as 96.015. Key short-term resistance remains at 96.945, the Apr 26 high.
