US TSYS: J.P.Morgan Adjust Yield Forecast Higher After Econ & Fed View Change
Late Friday saw JPMorgan note that “while it seems more likely the Fed will pause in September, the ongoing resiliency of the data points to a Fed that is on hold for much longer as well.”
- “Notably, our economists have revised their growth forecasts higher for the next year, no longer expecting the economy to contract late this year into early-2024 and have lowered their YE24 unemployment rate forecast by 0.3ppt to 4.5%.”
- “Given these factors, we have also adjusted our Fed forecast: we had previously expected the Fed to begin normalizing rates by 50bp per quarter in 2Q24, but now expect 25bp of easing per quarter beginning in 3Q24.”
- “We raise our year-end 10-year yield forecast from 3.50% to 3.85% to reflect both the impulse of better growth, but also to reflect a Fed that is on hold for more than a year, and that will ultimately deliver a slower pace of rate normalization as well.”
- “Despite the more patient Fed we do not envision a much flatter yield curve at year-end, owing to a more rapid drop in the Fed’s share of the Treasury market than we had previously anticipated.”
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JGB TECHS: (U3) Fades, But Still North of Support
- RES 3: 151.26 - High Mar 3 2022
- RES 2: 149.75/150.81 - High Nov 11 / High Aug 5 2022
- RES 1: 149.21/53 High May 12 / High Mar 22
- PRICE: 147.98 @ 15:46 BST Jul 07
- SUP 1: 147.34 - Low May 26
- SUP 2: 146.11 - Low Feb 22
- SUP 3: 144.15 - Low Jan 13
JGBs continue to operate above support at 147.34, the May 26 low. The contract has breached 148.41, the May 12 high. This strengthens a bullish case and signals scope for a climb towards the next key resistance at 149.21/53, highs from May and March. Clearance of these levels would highlight an important break. To the downside, a breach of 147.34 would signal a stronger reversal and open 146.11, the Feb 22 low.
AUSSIE 10-YEAR TECHS: (U3) Trend Needle Points South
- RES 3: 97.040 - High Aug 03 2022 (cont)
- RES 2: 96.780/975 - High May 5 / High MAr 14
- RES 1: 96.440 - High Jun 2
- PRICE: 95.760 @ 15:44 BST Jul 07
- SUP 1: 95.685 - Low Jul 7
- SUP 2: 95.670 - Low Jun 17 2022
- SUP 3: 95.094 - 1.0% 10-dma envelope
Bearish conditions in Aussie 10y futures firmed with further losses early Friday as prices hit a new pullback low. This wholly erases the recent bounce and reinforces current bearish conditions. Note that moving average studies remain in bear mode, highlighting the trend direction. The recent move lower opens the Dec 29 low of 95.670 for support. A break would accelerate losses. Initial firm resistance is at 96.440, the Jun 2 high.
USDCAD TECHS: Rally Hits Reverse as NFP Short of Forecast
- RES 4: 1.3449 61.8% retracement of the May 26 - Jun 27 downleg
- RES 3: 1.3427 High Jun 7
- RES 2: 1.3401 50-dma
- RES 1: 1.3386 50.0% retracement of the May 26 - Jun 27 downleg
- PRICE: 1.3297 @ 16:16 BST Jul 7
- SUP 1: 1.3280 20-day EMA
- SUP 2: 1.3203 Low Jul 4 and a key short-term support
- SUP 3: 1.3117 Low Jun 27 and the bear trigger
- SUP 4: 1.3084 1.618 proj of the Apr 28 - May 8 - May 26 price swing
The Thursday rally in USD/CAD hit reverse Friday, as a poorer-than-expected US jobs data dented the greenback. This reverses any bullish signal emanating from the break of resistance at the 20- and 50-day EMAs earlier in the week, with the pair more neutral into the end of the week. This confirms the view that the latest recovery had been corrective in nature, refocusing markets on Initial key short-term support at 1.3203, the Jul 4 low.
