FOREX: Greenback Firmer as Trump Team Look to Shift Focus to Taxes
- The greenback is firmer, reversing a small part of the minor losses posted into the Monday close. Flow remains a key driver for currency markets here, with price action yesterday consistent with flow drivers marked by month-end value date on Monday. Most corporate and rebalancing flow models point to USD buying for the end of April, which may be showing through in the price action so far Tuesday, given the minimal headline flow.
- Trump's schedule is pretty contained Tuesday, keeping focus on any reports concerning the progress of trade deals - as cabinet members continue to talk up the prospects of deals with Asian nations - and in particular India - which could be the first agreements to cross the line and avoid a return of sky-high tariffs.
- Treasury Secretary Bessent - seen as the most market-friendly member of Trump's cabinet met yesterday with several senior members of Trump's economic team to make the passage of tax legislation a top priority for the party. The meeting set July 4th as a key date going forward, the date by which the team look to achieve the tax overhaul and reset the public's view that this administration has a poor grasp on the economy.
- The USD is firmer against all others in G10, but CAD also trades well following the election results that show Carney's Liberals extending their time in office. EUR/CAD is holding below the 1.5800 handle, keeping the shallow bounce theme and raising the importance of 1.5668 support ahead.
- Event risk picks up Tuesday with the publication of April economic confidence data from the Eurozone and the advance trade balance release, JOLTS job openings for March and the latest consumer confidence data from the US. Central bank speak is still contained as the Fed remain inside their pre-meeting media blackout period. ECB's Villeroy and BoE's Ramsden are set to speak, however.
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USDCAD TECHS: Bullish Outlook
- RES 4: 1.4700 Round number resistance
- RES 3: 1.4641 76.4% retracement of the Feb 3 - 14 bear leg
- RES 2: 1.4452/4543 High Mar 13 / 4 and a bull trigger
- RES 1: 1.4402 High Mar 20
- PRICE: 1.4292 @ 16:50 GMT Mar 28
- SUP 1: 1.4235 Low Mar 26 and a key near-term support
- SUP 2: 1.4151/4107 Low Feb 14 / 50.0% of Sep 25 - Feb 3 bull run
- SUP 3: 1.4011 Low Dec 5 ‘24
- SUP 4: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
USDCAD traded through support at 1.4242 on Wednesday but has recovered. A return lower and clearance of this level would undermine the bull theme and instead highlight potential for a test of 1.4151, the Feb 14 low and a bear trigger. Moving average studies continue to highlight a dominant uptrend. A reversal higher would refocus attention on the bull trigger at 1.4543, the Mar 4 high. First resistance is 1.4402, the Mar 20 high.
US FISCAL: Debt Limit "Extraordinary Measures" Pick Up, But Cash Dipping Pre-Tax
Treasury data shows that there were $207B of "extraordinary measures" available to circumvent hitting the debt limit as of Wednesday Mar 26.
- That's the most since Jan 27th and up from $163B a week earlier, from a total $376B available.
- However, Treasury cash in the TGA fell to $316B as of the 26th (and was down to $280B on Thursday), meaning there were a combined $523B of resources available to avert the debt limit, the lowest since the impasse began in January (and half of the starting amount of just over $1T).
- The next couple of weeks will be very important for Treasury, as they represent the biggest tax take of the year. The Congressional Budget Office reported this week that per its estimates "if the debt limit [$36.1T] remains unchanged, the government's ability to borrow using extraordinary measures will probably be exhausted in August or September 2025." Treasury wrote to Congress this month that they would be able to provide an update on the x-date in the first half of May, after the conclusion of tax season.
AUDUSD TECHS: Remains Above Support
- RES 4: 0.6429 High Dec 12 ‘24
- RES 3: 0.6414 38.2% retracement of the Sep 30 ‘24 - Feb 3 bear leg
- RES 2: 0.6409 High Feb 21 and a bull trigger
- RES 1: 0.6391 High Mar 17 / 18
- PRICE: 0.6291 @ 16:46 GMT Mar 28
- SUP 1: 0.6258 Low Mar 21
- SUP 2: 0.6187 Low Feb 4
- SUP 3: 0.6171/6088 Low Feb 4 / 3 and a key support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
AUDUSD is unchanged. A short-term bull theme is intact and the latest move down appears corrective. Key short-term support to watch is 0.6187, the Mar 4 low. Clearance of this level would reinstate a bear threat. First support is at 0.6258, the Mar 21 low. A stronger recovery would refocus attention on 0.6409, the Feb 21 high. Clearance of this hurdle would strengthen the bull cycle and resume the uptrend that started Feb 3.
