USDCAD TECHS: Eyeing Key Short-Term Resistance
- RES 4: 1.3805 High Mar 24
- RES 3: 1.3730 76.4% retracement of the Mar 10 - Apr 14 low
- RES 2: 1.3695 High Mar 28
- RES 1: 1.3668 High Apr 28 and key resistance
- PRICE: 1.3640 @ 08:03 BST May 31
- SUP 1: 1.3539 20-day EMA
- SUP 2: 1.3485/3404 Low May 23 / 16
- SUP 3: 1.3363/15 Low May 11 / 8
- SUP 4: 1.3302 Low Apr 14 and a key near-term support
USDCAD bullish conditions remain intact and the latest pullback is considered corrective. Sights are set on resistance at 1.3668, the Apr 28 high and a key level. Clearance of this hurdle would strengthen the case for bulls and pave the way for a move towards 1.3695, the Apr 28 high. On the downside, initial firm support lies at 1.3485, the May 23 low. A break of this level would signal a potential short-term reversal.
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JPY: Japanese Yen Maintains Post-BOJ Downward Bias, AUDJPY Rises 0.80%
- Following the Bank of Japan’s latest meeting/decision on Friday, the Japanese Yen has been under significant pressure. USDJPY rallied sharply higher and in the process has cancelled any short-term bearish threats.
- USDJPY’s bull trigger at 135.13, Apr 19 high, has been cleared and the break confirms a resumption of the trend that started on March 24. So far on Monday amid holiday thinned trade, 137 has capped the topside, however, with a number of key short-term resistance levels breached, price action paves the way for 137.91, the Mar 8 high and a key resistance.
- AUDJPY is the strongest performer on Monday, rising 0.80% to the best levels since March 7, just shy of the 91.00 handle. Despite no deal being announced regarding First Republic Bank, equity index futures maintain their buoyant posture, underpinning the most recent AUDJPY rally ahead of the RBA decision on Tuesday.
- The RBA is expected to remain on hold at its policy decision meeting tomorrow, taking advantage of the Q1 core CPI undershoot to assess the impact of the 350bp of tightening that has been delivered.
- Immediate focus will be on the US ISM data released later today, with Wednesday’s FOMC meeting on Wednesday highlighting the local docket.
CROSS ASSET: Equities Take First Republic Bank Bid Uncertainty In Stride
With European markets closed for holidays (and no data/speakers scheduled), attention Monday is on the US. Not only do we get some key data in April ISM Manufacturing, but the FDIC is anticipated to name the winner of the bidding process for First Republic Bank some time before the US open.
- Multiple reports overnight point to the FDIC working through the night on the FRC decision, with several large banks in the takeover mix (JPM, PNC, Citizens Financial; Bloomberg reported that BofA and US Bancorp declined to bid).
- Broader equities seem unfazed by the FRC uncertainty, with S&P futures flat.
- Treasury futures have been softening overnight, TYM3 last off half a tick on the session at 115-06 and the cash curve marginally flatter.
- The dollar is up slightly, with strength vs JPY standing out (USDJPY +0.5% vs gains of 0.2% vs EUR and GBP).
- If you missed our Fed meeting preview out Friday, PDF is here. We'll be publishing our roundup of sell-side previews later today.
JGBS: Futures Dip Into Negative Territory, Swaps Curve Bear Steepens
JGB futures sit at Tokyo session lows, -3 compared to settlement levels, after local participants faded strength seen in overnight trade ahead of the weekend. Assisting the move lower over the Tokyo session has been a cheapening in US tsys in Asia-Pac trade.
- Consumer Confidence for April, just released, surprised on the upside with a print of 35.4 versus expectations of 34.5 and 33.9 in March. The data however failed to generate a significant immediate market reaction.
- JBM3 currently sits at 148.57, sandwiched between the April trading range's top at 147.92 and the March 22 high at 149.53. Technical analysis from MNI suggests that breaking the March 22 high would signal the continuation of the uptrend.
- Cash JGBs are trading mixed across the curve, with the 4-5-year zone outperforming. Benchmark yields are 0.4bp lower to 4.2bp higher, with the 30-40-year zone experiencing the weakest performance. The benchmark 10-year yield is 0.3bp higher at 0.397%, well below BoJ's YCC limit of 0.50%.
- The swaps curve has bear steepened with rates 0.2-5.6bp higher. Swap spreads are wider across the curve.
- The local calendar is light tomorrow with Monetary Base data for April as the highlight.
- A Liquidity Enhancement Auction For OTR 1-5 Year JGBs is scheduled for tomorrow.
