US TSYS: Futures Pressured In Early Dealing
TYM3 deals at 115-29+, -0-06, as futures are pressured in early dealing alongside a bid in e-minis. Asia-Pac participants are seemingly focusing on a BBG source report released on Friday which suggested that “U.S. authorities are considering expanding an emergency lending facility for banks in ways that would give First Republic Bank more time to shore up its balance sheet, according to people with knowledge of the situation.” Also note that the weekend saw CNBC sources note that “the surge of deposits moving from smaller banks to big institutions including JPMorgan Chase and Wells Fargo amid fears over the stability of regional lenders has slowed to a trickle in recent days.”
- Cash tsys finished 3-7bps richer on Friday across the major benchmarks.
- Tsys firmed through the European session on Friday as pressure on European banks led by Deutsche Bank saw safe havens bid. The surge in Foreign and International Monetary Authority repo facility, which rose to $60bn from zero the week prior, also supported the bid.
- 2 Year Yields fell to their lowest level since September 2022 before moderating in the NY session.
- Tsys moderated gains in the NY session as US equities firmed. Stronger than expected flash PMI data saw the losses marginally extend.
- Minneapolis Fed President Kashkari noted yesterday recent bank turmoil has increased the risk of a US recession but it was too soon to judge what that means for monetary policy.
- There is a thin data calendar in Asia Pac today. Further out Dallas Fed Manf. Activity headlines an otherwise thin docket. The latest 2 Year supply is also due.
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USDCAD TECHS: Building Base for Recovery
- RES 4: 1.3751 High Nov 4
- RES 3: 1.3742 2.0% 10-dma envelope
- RES 2: 1.3705 Dec 16 and the bull trigger
- RES 1: 1.3665 High Feb 24
- PRICE: 1.3564 @ 16:02 GMT Feb 24
- SUP 1: 1.3275/3262 Low Feb 14 / 2
- SUP 2: 1.3226 Low Nov 15 and bear trigger
- SUP 3: 1.3205 61.8% retracement of the Aug 11 - Oct 13 rally
- SUP 4: 1.3131 0.764 proj of the Oct 13 - Nov 15 - Dec 16 price swing
USDCAD rallied solidly Friday, topping the recent high of 1.3537. This defies the view that the recent bounce was corrective, as the pair builds a base for further gains. The bull trigger is still someway off at 1.3705, but a weekly close above the 1.3500 would prove constructive. A break of 1.3262, Feb 2 low, would strengthen bearish conditions and open 1.3226, the Nov 15 low and the bear trigger.
US TSYS: Hot PCE Green Light For More Fed Hikes
Tsys near lows after the bell. Hot PCE read points to "more to do" by the Fed to reel in inflation, yield curves flatter but off lows as 30s races 2s to new contract lows: TUH3 new contract low of 101-17.88, 2YY hits 4.8364% - highest level since July 2007; USH3 133-20 low, 30YY tapped 3.9597% high.
- Tsys gapped lower as nominal personal spending was stronger than expected in Jan (1.8% vs 1.4) and incomes weaker (0.6% vs 1.0), with the savings rate rising further to 4.7% in Jan from 4% in Q4 and a low of 2.7% in June (albeit prone to sizeable revs). Stronger inflation meant that real spending came in as expected, bouncing strongly after yesterday's surprise downward revision with the 1.1% M/M the strongest since Mar'21.
- Jump in new home sales added to the FI sell-off, 7.2% M/M in Jan (cons 0.7) after an upward revised 7.2% M/M (initial 2.3), leaving sales at 670k (cons 620k) for the highest since March.
- Fed funds implied hike for Mar'23 at 31.0bp, May'23 cumulative 58.1bp (+1.9) to 5.164%, Jun'23 75.5bp (+3.0) to 5.338%, terminal at 5.40% in Aug'23/Sep'23, off first half high of 5.445%.
- Early Fed speak from Cleveland Fed Mester in line with previous, favoring getting rates somewhat above 5%, won't pre-judge next meeting size.
- Boston Fed President Susan Collins said Friday she sees the need for more rate increases amid high inflation and then likely holding there for an extended period of time.
AUDUSD TECHS: Flips Bearish
- RES 4: 0.7245 2.00 proj of the Nov 21 - Dec 13 - Dec 20 price swing
- RES 3: 0.7202 High Jun 9
- RES 2: 0.7172 1.764 proj of the Nov 21 - Dec 13 - Dec 20 price swing
- RES 1: 0.7082/0.7158 High Feb 3 / 2 and the bull trigger
- PRICE: 0.6726 @ 15:57 GMT Feb 24
- SUP 1: 0.6725 100-dma
- SUP 2: 0.6719 Low Feb 24
- SUP 3: 0.6688 Low Jan 3
- SUP 4: 0.6629 Low Dec 20
AUDUSD’s February downtrend accelerated Friday, with the pair hitting a new pullback low at 0.6719. This makes for a clean break of the 200-dma at 0.6801 and opens fresh losses toward Dec lows at 0.6629. The 100-dma has contained the fallout so far, but a break below here would be bearish at 0.6725. Technical conditions are yet to hit oversold, leaving a lower likelihood of a corrective recovery at this stage.
