US: House Vote On 'Big Beautiful Bill' Underway Shortly
May-22 10:25
The House of Representatives is shortly due to hold a final roll call vote on the 'Big Beautiful' reconciliation megabill that covers the bulk of President Donald Trump's domestic agenda. LIVESTREAM
- The package is expected to pass after pressure from Trump and House Republican leadership yesterday won over hardline GOP conservatives who threatened to tank the bill, citing concerns over the deficit implications of the package.
- Rep Warren Davidson (R-OH) issued a statement a few moments ago opposing the bill: "While I love many things in the bill, promising someone else will cut spending in the future does not cut spending. Deficits do matter and this bill grows them now... I cannot support this big deficit plan. NO."
- Rep Thomas Massie (R-KY) is also expected to vote 'no'. If ~four Republican reps oppose the bill, the roll call will fail. Despite Davidson's late objection, the bill is likely to pass on the first ballot. If it doesn't, Johnson will engage in personal outreach until he finds sufficient support to pass the bill.
- After the bill passes the House, it will be handed to the Senate, where it is likely to be rewritten and returned to the lower chamber.
- This week's standoff will be renewed in June when House conservatives confront a Senate version of the bill that is likely to be more moderate on safety net programmes and government spending than the House version.
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US 10YR FUTURE TECHS: (M5) Recent Gains Are Considered Corrective
Apr-22 10:20
- RES 4: 113-04 76.4% retracement of the Apr 7 - 11 bear leg
- RES 3: 112-12 61.8% retracement of the Apr 7 - 11 bear leg
- RES 2: 111-25 50.0% retracement of the Apr 7 - 11 bear leg
- RES 1: 111-01+/17+ 20-day EMA / High Apr 16
- PRICE: 110-21 @ 11:09 BST Apr 22
- SUP 1: 110-15/109-08 Low Apr 15 / 11 and the bear trigger
- SUP 2: 108-26+ 76.4% retracement of the Jan 13 - Apr 7 bull cycle
- SUP 3: 108-21 Low Feb 19
- SUP 4: 108-03+ Low Dec 12 ‘24 and a key support
Treasury futures have pulled back from last week’s highs. For now, recent gains are considered corrective and the bear cycle that started Apr 7, remains in play. The next resistance to watch is 111-25, 50.0% of the Apr 7 - 11 bear legsell-off. For bears, a resumption of weakness would refocus attention on 109-08, the Apr 11 low and the bear trigger. Clearance of this level would resume the downtrend.
OUTLOOK: Price Signal Summary - USD Downtrend Remains Firmly Intact
Apr-22 10:06
- In FX, the trend in EURUSD remains bullish and Monday’s cycle high reinforces current conditions and highlights a bullish start to this week’s session. The break higher maintains the price sequence of higher highs and higher lows and note that moving average studies are in a bull-mode position, signalling a continued dominant uptrend. The focus is on 1.1608 next, the Nov 9 2021 high. Key support is unchanged at the 20-day EMA, at 1.1140.
- The trend condition in GBPUSD remains up and Monday’s rally reinforces current conditions. The pair has recently breached key resistance at 1.3207, the Apr 3 high and a bull trigger. This highlights a resumption of the medium-term uptrend. Note that moving average studies are in a bull-mode position, signalling a dominant uptrend. Sights are on 1.3434 next, the Sep 26 ‘24 high. Support to watch is 1.3075, the 20-day EMA.
- The trend condition in USDJPY remains bearish and this week’s fresh cycle lows reinforce this condition. The extension down confirms a resumption of the downtrend and maintains the price sequence of lower lows and lower highs. Note too that moving average studies are in a bear-mode position highlighting a dominant downtrend. Sights are on 139.79 next, a 1.382 projection of the Feb 12 - Mar 11 - 28 price swing. The 1.50 projection is at 138.82. Initial firm resistance to watch is the 20-day EMA, at 145.25. First resistance is 142.25, the Apr 21 high.
FOREX: No Let-Up for FX Risk as Lagged Effects Keenly Felt by Corporates
Apr-22 10:02
- While front-end implied vols have abated from highs, the fresh cycle low in the USD Index and lagged impacts on corporates is still a major present risk. The histogram below shows that while 3m implied is off 12m highs, it remains well above the upper quartile for the majority of G10 FX.
- The effects of broad USD volatility are also being keenly felt in the corporate world: UK AIM-listed currency risk management firm Argentex have suspended their shares after FX volatility compromised their short-term liquidity position. In an RNS release they note that if FX vols persist its liquidity position would be "significantly stretched". Full RNS post here: https://www.londonstockexchange.com/news-article/AGFX/financial-position-suspension-of-trading/16998959
- Firms like Argentex sell FX hedging products including forwards and options to corporate clients, who are then subject to margin calls should markets move against their position. In turn, the firm hedges its cumulative exposure in the wholesale market via major banking partners - but are then exposed to the same margin call risk through times of volatility. That appears to be the scenario playing out here - and is unlikely to be a one-off case.
- Distressed liquidity among corporate service providers is an effective proxy for the underlying client - and serves as a further reminder of the dangers to economic activity from even brief spells of extended FX vol.
