JGBS: Futures Test Overnight Lows, Cash Mixed, Ueda Eyed
Local headline flow remained light, while JGB futures were defensive as Tokyo reacted to Friday’s moves in wider core global FI markets, leaving the contract -10 at the lunch break, with participants unwilling to force a break of the overnight session base in the contract thus far (that level represented the Tokyo morning low). Cash JGBs are more mixed, generally trading within -/+1bp of Friday’s closing levels, with 7s providing the weak point owing to the move seen in futures. The swaps curve has seen a more conventional, albeit limited, twist flattening move, pivoting around 30s. Focus remains on BoJ Governor-in-waiting Ueda’s afternoon appearance in front of the upper house of parliament, which provides the focal point for participants on Monday.
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USDCAD TECHS: Remains Vulnerable
- RES 4: 1.3751 High Nov 4
- RES 3: 1.3705 Dec 16 and the bull trigger
- RES 2: 1.3665 High Jan 6
- RES 1: 1.3434/3521 20-day EMA / High Jan 19
- PRICE: 1.3334 @ 16:48 GMT Jan 27
- SUP 1: 1.3301 Low Jan 27
- 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 bearish trend conditions have been reinforced. The move lower Thursday extended through to the Friday close having resulted in a print below initial support at 1.3322. A clear break of this level signals scope for 1.3226, the Nov 13 low and the bear trigger. Moving average studies are in a bear mode position, highlighting a downtrend. On the upside, the pair needs to clear 1.3521 to signal a reversal.
AUDUSD TECHS: Northbound
- 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: 0.7142 High Jan 26
- PRICE: 0.7108 @ 16:45 GMT Jan 27
- SUP 1: 0.6994/6943 Low Nov 24 / 20-day EMA
- SUP 2: 0.6872 Low Jan 19 and a key support
- SUP 3: 0.6826 50-day EMA
- SUP 4: 0.6688 Low Jan 3 and key support
AUDUSD remains firm and traded higher Thursday. Resistance at 0.7063, the Jan 18 high, has been cleared this week. This has confirmed a resumption of the uptrend and maintains the bullish price sequence of higher highs and higher lows. The focus is on a move to 0.7172 next, a Fibonacci projection. On the downside, short-term support is seen at the 20-day EMA - it intersects at 0.6943.
US TSYS: Late Tsy Roundup: Implied Hike Steady at 25.9Bp Ahead Wed FOMC
- Tsys mildly weaker after the bell, well off late morning lows to near middle of range through early overnight trade. Tsy 30YY currently 3.6306 -.0091, vs. 3.6845% high)
- Higher than expected Japanese CPI data overnight (+4.4% Y/Y; MEDIAN 4.0%; Dec 3.9%) got the ball rolling overnight, Tsys extending lows ahead the NY open.
- Tsys see-sawed off lows drawing modest buying in intermediates to long end after largely in-line data: personal income +0.2%; NOM PCE -0.2%, modest lower revision to prior. Little react to midmorning Pending Home Sales (+2.5% MOM; -33.8% YOY) and UofM sentiment 64.9; est. 64.6.
- Fed funds implied hike for Feb'23 at 25.9bp (-0.7), Mar'23 cumulative at 46.4bp (-0.5) to 4.793%, May'23 56.9bp (+.1) to 4.898%, terminal at 4.905% in Jun'23.
- Focus on next week Wed's FOMC policy annc, dovish risks to this meeting appear at least partly priced in, including some expectations of Statement language acknowledging decelerating inflation, or a clear signal that the end of the hiking cycle is near.
- Next employment report covering January out next Friday as well, current median est at +175k vs. +223k prior..
