FOREX: Fresh Lows For GBP, EUR, & AUD, Yen Outperforms
The USD remains on the front foot, particularly against GBP and EUR, which typically don't move much during the Asia Pac time zone. The USD BBDXY index was last above 1321.7, above intra-session highs from Friday's US session.
- As the session has unfolded GBP losses have accelerated. GBP/USD was last near 1.2130/35, off a little over 0.60% and the worst G10 performer so far today. This is fresh lows in the pair back to 2023.
- There don't appear any fresh catalysts for the move, other than continuation of losses from last week, amid financial stability/twin deficit concerns.
- EUR/USD is back to 1.0210, testing under Friday lows as well. This puts the pair back to levels last seen in 2022. We are around 0.30% weaker against the USD. SEK is off around 035% as well, last near 11.26 against the USD.
- AUD and NZD initially showed some resilience but this hasn't been sustained. AUD/USD was last sub 0.6135, fresh lows back to 2020. NZD/USD is close to 0.5550. We had Australian and NZ data prints, but they didn't shift the sentiment needle.
- Equity sentiment has been weak throughout the region, following losses in US markets on Friday (weighed by higher US yields post NFP). There has been no US Tsy cash trading so far today, with Japan markets out.
- Yen is benefiting from the risk averse tone, with USD/JPY upticks towards 158.00 sold. We were last near 157.50, around 0.15% stronger in yen terms.
- There were a raft of headlines earlier around PBoC support for the yuan, but this didn't support CNH greatly.
- Looking ahead, it is relatively quiet with just NY Fed 1-Yr Inflation Expectations & Federal Budget Balance on tap.
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MACRO ANALYSIS: MNI US Macro Weekly: Inflation Data Keep Fed Cut On Track
We have published and e-mailed to subscribers the MNI US Macro Weekly offering succinct MNI analysis across the range of macro developments over the past week. Please find the full report here:
USDCAD TECHS: Fresh Cycle High
- RES 4: 1.4393 2.0% 10-dma envelope
- RES 3: 1.4327 2.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4296 2.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4246 2.00 proj of the Oct 17 - Nov 1 - 6 price swing
- PRICE: 1.4236 @ 16:38 GMT Dec 13
- SUP 1: 1.4069/3944 20- and 50-day EMA values
- SUP 2: 1.3928 Low Nov 25 and a key support
- SUP 3: 1.3822 Low Nov 6
- SUP 4: 1.3747 Low Oct 17
The trend direction in USDCAD remains up and this week’s gains to a fresh cycle high, reinforces the current bullish theme. The pair has cleared 1.4178, the Nov 26 high, to confirm resumption of the uptrend and maintain the price sequence of higher highs and higher lows. Sights are on 1.4246 next, a Fibonacci projection. Key short-term support has been defined at 1.3928, the Nov 25 low. Initial support to watch lies at 1.4069, the 20-day EMA.
US TSYS: Extending Late Session Lows, Curves Bear Steepen Ahead Next Wed's FOMC
- Treasuries traded steadily lower throughout Friday's session, initially mirroring weak action in Bunds and Gilts. By the close, the Mar'25 10Y contract slipped to 109-26 (-18) the lowest level since November 22, 10Y yield rising to 4.4046% high (+.0768).
- Initial technical support at 109-22 (76.4% Nov 15 - Dec 6 Upleg) followed by 109-20 (Low Nov 20/21).
- Curves bear steepened: 2s10s +2.272 at 15.568 as short end rates outperformed ahead of next week's FOMC policy announcement where another 25bp rate cut was expected but not certain amid current macro and political uncertainty. That said, the latest unemployment and inflation data have kept the FOMC on track to cut the federal funds rate by 25bp (to 4.25-4.50%) next Wednesday.
- Projected rate cuts into early 2025 look near steady to lower vs. this morning levels (*) as follows: Dec'24 cumulative -24.3bp (-23.7bp), Jan'25 -28.6bp (-29.6bp), Mar'25 -42.2bp (-43.9bp), May'25 -48.4bp (-50.5bp).
- No reaction to this morning's import/export prices, Monday brings flash S&P Global PMIs, Retail Sales, IP & Cap-U on Tuesday.
