FOREX: Greenback Extends Weekly Reversal Lower, USD Index Eyes Cycle Lows
Jun-24 16:02
- The dollar remained under renewed pressure Tuesday, as firmer risk sentiment permeated through global markets following the announcement of a truce between Israel and Iran. This allowed the greenback to extend its reversal south that begun late Monday, with the dollar index within close proximity of cycle lows.
- Greenback weakness will likely have been bolstered by cleaner short-term positioning, weaker-than-expected US consumer confidence and Fed Chair Powell not ruling out the chance of an FOMC rate cut as soon as July. In remarks to Congress on Tuesday, Powell said “many paths are possible” when asked about the possibility of a July rate cut, explaining that lower inflation and weaker labour data could portend an earlier cut to interest rates.
- USDJPY (-0.86%) briefly extended the reversal from yesterday’s peak to over 350 pips and the swift move back below its 20-day EMA is a bearish development. With positioning a lot cleaner now following yesterday’s spike higher to 148.03, the risks may be tilted to a more protracted move south, targeting 144.34 (Jun 18 low) initially, before 142.80 Low Jun 13.
- In similar vein, the Swiss Franc continued to perform resiliently, prompting USDCHF (-0.94%) to match the April lows at 0.8040. A break of this bear trigger would confirm a resumption of the medium-term technical downtrend and open the 0.8000 handle, and 0.7927, the 1.50 projection of the May 1 - Sep 6 2024 - Jan 13 price swing.
- AUD and NZD are also performing well, but remain shy of their most recent highs against the greenback, which are located at 0.6552 and 0.6088. Dollar dynamics have allowed the likes of EURUSD and GBPUSD to rise through the overnight highs to their best levels of the cycle, and the next immediate targets for the move are 1.1696 and 1.3681 respectively.
- Australian CPI highlights the Wednesday data calendar, before US new home sales figures. Fed Chair Powell will testify in front of the Senate.
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JGB TECHS: (M5) Rallies off Lows
May-23 22:45
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.40 @ 15:42 GMT May 23
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows and for now, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US FISCAL: Total Tariff Income Jumping In May As New Rates Hit
May-23 20:54
Treasury reported a record $16.5B in customs/excise taxes on May 22, reflecting the large increase in tariff rates that went into effect in April.
- Today's report is important because it represents the largest tariff collections of the month which are typically on a due date around the 22nd, when most corporate importers make their payments.
- Thursday's one-day collection is a record, and the month has already set a new record. Tariff revenues have totaled $22.3B so far in May, and are came in at $17.4B in April (after averaging $8.1B/month in 2024).
- For the fiscal year as a whole so far, customs duties have totaled just under $93B, per the Treasury Daily Statement.
US FISCAL: Extraordinary Measures Continue To Dissipate Alongside Treasury Cash
May-23 20:35
Treasury's latest estimate of the size of "extraordinary measures" available to use "in order to prevent the United States from defaulting on its obligations as Congress deliberate[s] on increasing the debt limit" is down to $67B on May 21 (of an available $299B), vs $82B a week earlier.
- The amount hit the 2nd lowest level since the debt limit impasse started, at $46B, on May 20 (the low was $34B on Feb 24).
- With $476B in cash in the Treasury General Account on May 21, that left the total resources available to Treasury at $543B, the least since April 14 - the day before the annual April 15 tax deadline.
- Treasury Sec Bessent warned Congress earlier this month that "there is a reasonable probability that the federal government's cash and extraordinary measures will be exhausted in August while Congress is scheduled to be in recess. Therefore, I respectfully urge Congress to increase or suspend the debt limit by mid-July".
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