USDCAD TECHS: Bulls Remain In The Driver’s Seat

• RES 4: 0.6550 High Nov 25
• RES 3: 0.6501 50-day EMA               
• RES 2: 0.6429 High Dec 12  
• RES 1: 0.6337/6396 Low Dec 11 / 20-day EMA
• PRICE: 0.6263 @ 16:55 GMT Dec 20
• SUP 1: 0.6199 Low Dec 19 
• 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

The trend needle in AUDUSD continues to point south and this week’s fresh cycle lows and Wednesday’s sell-off, reinforce a bear theme. The move down 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. The break lower opens 0.6158 next, a Fibonacci projection. Initial firm resistance to watch is 0.6396, the 20-day EMA. 

• Treasuries have seen some downward pressure late in the session but hold onto gains for the day (albeit only just in the case of 2s).
• Core PCE inflation was slightly softer than expected but still solid trend rates for supercore inflation appear to have helped anchor Fed rate expectations with markets only willing to pare so much of Wednesday’s reaction to a hawkish Fed.
• Polymarket shows odds of a government shutdown as having tilted from 75% overnight to 45% currently.
• Cash yields are 0.8-5.6bps lower, with the belly leading declines after being dragged higher by a particularly weak 5Y TIPS auction yesterday with a 6.7bp tail.
• 2s10s of 21.2bps (-3.8bp) has seen a sizeable pullback away from yesterday’s fresh ytd high of 28bps, potentially in profit taking for a successful week for steepeners.
• 10Y yields have topped out this week at 4.5923% (currently 4.158%), easily through the mid-Nov high of 4.50% for highs since May.
• TYH5 trades at 109-01 having pulled back from an earlier high of 109-08+. It consolidates an increase away from support at 108-16+ (Dec 19 low) but hasn’t troubled resistance at 110-07+ (20-day EMA).
• Fed Funds implied rates show 2bp of cuts for Jan, a cumulative 26bp for June and 39bp for Dec.
• Next week sees Monday start with durable goods orders and new home sales, having been pulled forward from Tuesday. 

• ESH5 at 6017.50 is holding onto impressive gains today (+1.4%) but it still leaves the contract -1.8% lower on the week after Wednesday’s Fed-induced 3.1% slide. Gains are unusually similar across other major indices.
• Polymarket shows odds of a government shutdown as having tilted from 75% overnight to 45% currently.
• A session high of 6050.75 has easily seen clearance of resistance at 6008.80 (50-day EMA) but it’s remained below next resistance at 6074.86 (20-day EMA). Support meanwhile is seen at the earlier low of 5866.00.
• 10Y Treasury yields falling 4bps today has given some respite to real estate which leads gains with +2.3%, followed by IT (+1.8%) and financials (+1.7%). All 11 major sectors are in the green with consumer staples (+0.4%) and energy (+0.8%) lagging gains.
• Today sees mixed strength for megacaps, led by Nvidia (+3.1% to leave it just +0.3% higher on the week). Weekly moves are even more mixed, ranging from Meta (-3.7%) and Microsoft (-1.8%) to Apple (+2.2%) and Alphabet (+1.4%).
• E-mini comparison: S&P 500 +1.4%, Nasdaq 100 +1.5%, Dow Jones +1.4%, Russell 2000 +1.5%.