US TSYS: Extending Late Session Highs: ME Risk Adds to Soft CPI Support

• Treasuries gapped lower in early London trade, stocks surged (DJIA +1103 at 42,352) to the pre-Liberation Day levels (April 2) after the US and China agreeing to pause their retaliatory reciprocal tariffs for 90 days.
• After a collective sigh of relief, Treasuries traded sideways, near session lows for much of the session, Jun'25 10Y futures -20.5 at 110-05.5 after the close (110-01.5 low/110-19.5 high) on heavy volumes (TYM>1.880M).
• The next support to watch is 110-01+, a Fibonacci retracement point. Clearance of this level would strengthen a bearish theme and expose a key support at 109-08, the Apr 24 low.
• Curves bear flattening while projected rate cut pricing retreats from this morning levels (*) as follows: Jun'25 at -2.0bp (-2.8bp), Jul'25 at -10.8bp vs. (-13.1bp), Sep'25 -27.0bp (-29.3bp), Oct'25 -40.3bp (-42.6bp).
• Aside from some Fed speakers, tomorrow's focus is on April CPI figures at 0830ET. 

A slightly larger-than-expected fiscal surplus in April of $258.4B ($256.0B survey, $209.5B prior year) provides some evidence that the fiscal trajectory isn't quite as worrisome as it appeared earlier in the year, but overall deficits remain wide.

• The $1.05T deficit through the first 7 months of the 2025 fiscal year (October to September) is nearly $200B higher than at the same point of the previous FY, though as usual a sizeable April tax take helped pare the cumulative shortfall.
• Total revenue rose $74B vs April 2024, to $850B, with expenditure up $25B to $591B. The April 15 tax deadline of course makes this the key month for revenue in the fiscal year.
• Despite the latest uptick in individual corporate ($+1.7B vs last year) and individual (+$55.1B) tax collection, if one assumes May-Sept budget balances are unchanged from last year's, the FY2025 deficit is on pace to come in around $2T, which would be above most estimates coming into the year.
• However, there is some sign that tariffs are contributing in a direct way to the smaller overall deficit: customs duties totaled $15.6B in April, easily an all-time record for a single month and up from $6.4B in April 2024. Indeed that's a pace not far from $200B on an annualized basis.

• RES 4: 0.5682 High Nov 12 ‘24  
• RES 3: 0.6550 61.8% retracement of the Sep 30 ‘24 - Apr 9 bear leg
• RES 2: 0.6528 High Nov 29 ‘24
• RES 1: 0.6515 High May 7 
• PRICE: 0.6374 @ 15:58 BST May 12
• SUP 1: 0.6371/6339 Intraday low / 50-day EMA   
• SUP 2: 0.6275 Low Apr 14    
• SUP 3: 0.6181 Low Apr 11
• SUP 4: 0.6116 Low Apr 10  

AUDUSD continues to trade below last Wednesday’s high. The trend condition is bullish and the latest move down is considered corrective. The recent breach of 0.6450, the Apr 29 high, confirmed a resumption of the uptrend. Note that moving average studies remain in a bull-mode position, highlighting an uptrend. A resumption of the trend would open 0.6528, the Nov 29 ‘24 high. Key support to monitor is 0.6342, the 50-day EMA.