STIR: Fed Rate Path Consolidates Modest Softening On Tariff Delays
- Fed Funds implied rates hold yesterday’s modest paring of previous climbs, following a one-month delay of 25% tariffs on Canada and Mexico. The deadline for setting 10% tariffs on China has passed and China has since announced targeted retaliatory measures of its own due to be effective Feb 10.
- Cumulative cuts from 4.33% effective: 4bp Mar, 10bp May, 20.5bp Jun, 25bp Jul and 42bp Dec.
- The 42bp of cuts for 2025 is up from 38bp at yesterday’s peak when the US was still set to push ahead of 25% tariffs on Canada and Mexico. The recent range includes last week’s 54bp on US tech-led risk-off and 24bps after last month’s strong payrolls report.
- Trump administration policy-related headlines are likely to remain the main driving force in the immediate future but today’s JOLTS report for December can also have an impact.
- Bostic (non-voter) speaks for a second day running in a moderated discussion on housing at 1100ET. He didn’t move the needle yesterday, suggested in a Q&A that the Fed may be "waiting for a while" before easing rates further. "I want to see what the 100 bps we did last year translates to in terms of the economy. Depending on what the data are, it might mean that we are waiting for a while."
- Daly (non-voter) also speaks in a moderated panel at 1400ET. She last spoke Jan 4, saying inflation remains uncomfortably above the 2% target and that the labor market is roughly in balance with no desire to see any further slowing. The Fed is now facing more of a trade-off between inflation and the jobs market.
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JGB TECHS: (H5) Returns Lower
- RES 3: 149.55 - High Mar 22 (cont)
- RES 2: 147.74 - High Jan 15 and bull trigger (cont)
- RES 1: 144.48/146.53 - High Nov 11 / High Aug 6
- PRICE: 142.12 @ 15:01 GMT Jan 03
- SUP 1: 141.65 - Low Dec 30
- SUP 2: 141.56 - 1.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 141.05 - 2.000 proj of the Aug 6 - Sep 3 - 9 price swing
Markets slipped on the hawkish Fed and are yet to fully recover, touching 141.65 on the way lower. Medium-term trend signals on the continuation chart continue to point south. A resumption of the trend would pave the way for a move towards 141.56, a Fibonacci projection point on the continuation chart. A stronger recovery would open 144.48, the Nov 11 high. Further out, key resistance is at 146.53, the Aug 6 high (cont).
USDCAD TECHS: Bull Flag Highlights A Clear Uptrend
- RES 4: 1.4669 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4392 @ 15:50 GMT Jan 3
- SUP 1: 1.4336 Low Dec 20
- SUP 2: 1.4307/4232 20-day EMA / Low Dec 17
- SUP 3: 1.4136 50-day EMA
- SUP 4: 1.4011 Low Dec 5
USDCAD is unchanged and bulls remain in the driver’s seat. The latest pause appears to be a flag formation - a bullish continuation signal. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4307, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Southbound
- RES 4: 0.6471 High Dec 9
- RES 3: 0.6408 50-day EMA
- RES 2: 0.6341 High Dec 18
- RES 1: 0.6247/6282 High Dec 30 / 20-day EMA
- PRICE: 0.6204 @ 15:21 GMT Jan 3
- SUP 1: 0.6179 Low Dec 31
- 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
A bearish trend condition in AUDUSD remains intact and the pair continues to trade closer to latest lows. Recent weakness 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. Scope is seen for an extension towards 0.6158 next, a Fibonacci projection. Initial firm resistance to monitor is 0.6282, the 20-day EMA.
