US: Corporate Credit Update: Near Month Highs
Investment-grade corporate credit risk holding near highs for the month - inside relatively narrow session range as stocks trade mildly mixed: SPX eminis trade -3.75 (-0.09%) at 4137.75; DJIA -117.13 (-0.35%) at 32944.63; Nasdaq +21.7 (0.2%) at 12401.53.
- Investment grade risk measured by Markit's CDXIG5 index -0.449 to 83.993; CDXHY5 high yield index at 100.507 (+0.200).
- Outperforming credit sectors (tighter or least wide): Energy (-1.9), followed by Consumer Staples and Communications both -1.6, Industrials and Technology both -1.5.
- Lagging sectors (wider or least narrow): Financials (subordinated and Senior) both -0.5, Consumer Discretionary and Materials (-0.9) followed by Health Care and Utilities (-1.4).
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USDCAD TECHS: Takes Out 20-, 50-Day EMAs
- RES 4: 1.3300 High Nov 4 2020
- RES 3: 1.3272 2.0% 10-dma envelope
- RES 2: 1.3224 High Jul 14
- RES 1: 1.3166 3.0% Upper Bollinger Band
- PRICE: 1.2853 @ 16:25 BST Jul 22
- SUP 1: 1.2823 Low Jul 22
- SUP 2: 1.2819 Low Jun 28 and key support
- SUP 3: 1.2763 Low Jun 13
- SUP 4: 1.2701 2.0% 10-dma envelope
USDCAD dipped further Friday, narrowing the gap with intraday support at 1.2819 - the late June low. The pair has now traded below both the 20- and 50-day EMA, denting the outlook and turning the near-term outlook negative. A deeper pullback opens 1.2763 and the 2.0% 10-dma envelope of 1.2701.
US TSYS: Weak Global PMIs
Tsys finish the week with a risk-off tone after weak PMI services read, Tsy broadly higher, curves initially steeper as hawkish forward rate hike guidance for the latter half of the year cooled -- a 75bps hike is still expected next week Wednesday while a 50bps move at the Sep policy meeting looks more likely.
- Tsys surged in early London trade after France and Germany mfg PMIs both missed expectations overnight, contractionary sub-50 reads at 49.6 and 49.2 respectively (UK mfg PMI bucked trend, coming out at 52.2 vs. 52.0 est).
- Volumes spiked as Tsy futures furthered the rally (30YY 2.9477% low) after preliminary July reading of the SP Global mfg PMI of 52.3 vs. 52.0 exp (52.7 in June), service sector miss at 47.0 vs. 52.7 est (steady to June read).
- Heavy volumes by the close w/ TYU2>1.6M. Yield curves turned mixed amid some profit taking in the short end: 2s10s -0.212 at -21.661 vs. -17.316 high, 5s30s however, +7.060 at 12.689.
- Fed terminal rate now seen at 3.33%, from what had been seen at 3.69% after last week's US CPI beat.
- Cross assets: Spot gold firmer but well off highs +4.78 at 1723.59, crude sold off late: WTI -1.54 to 94.81.
AUDUSD TECHS: Pierces 50-Day EMA
- RES 4: 0.7141 76.4% retracement of the Jun 3 - Jul 14 downleg
- RES 3: 0.7069 High Jun 16
- RES 2: 0.6977 High Jul 22
- RES 1: 0.6957 50-day EMA
- PRICE: 0.6955 @ 16:19 BST Jul 22
- SUP 1: 0.6786/6682 Low Jul 18 / 14 and the bear trigger
- SUP 2: 0.6647 0.764 proj of the Apr 5 - May 12 - Jun 3 price swing
- SUP 3: 0.6588 Low May 28 2020
- SUP 4: 0.6538 Low May 26 2020
AUDUSD traded well into the Friday close, piercing the 50-day EMA on an intraday basis. This improves the near-term outlook and opens next resistance at the Jun 16 high crossing at 0.7069. A solid break and close above here would cement the next upleg, which targets 0.7141, the 76.4% retracement of the Jun 3 - Jul 14 downleg. Any reversal lower would refocus attention on the 0.6682 bear trigger where a break would confirm a resumption of the downtrend.
