USDCAD TECHS: Key Short-Term Resistance Remains Exposed
- RES 4: 1.3300 High Nov 4 2020
- RES 3: 1.3192 1.00 proj of the Apr 5 - May 12 - Jun 8 price swing
- RES 2: 1.3113 High Nov 23 2020
- RES 1: 1.3084 High Jul 5
- PRICE: 1.2985 @ 18:10 BST Jul 7
- SUP 1: 1.2966 High Jul 1
- SUP 2: 1.2898 20-day EMA
- SUP 3: 1.2830/19 50-day EMA / Low Jun 28 and key support
- SUP 4: 1.2763 Low Jun 13
USDCAD is bullish. The pair rallied sharply higher Tuesday, reinforcing short-term bullish conditions. Key support around the 50-day EMA has remained intact - the average intersects at 1.2830. Tuesday’s gains also delivered a print above resistance at 1.3079, the May 17 high and a bull trigger. A clear break would strengthen bullish conditions and open 1.3113, Nov 23 2020 high. A break of support at 1.2819, Jun 28 low alters the picture.
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USDCAD TECHS: Bearish Outlook
- RES 4: 1.3077 High May 16 and the bull trigger
- RES 3: 1.2982 High May 16
- RES 2: 1.2896 High May 18 and a key resistance
- RES 1: 1.2686/2724 High Jun 2 / 20-day EMA
- PRICE: 1.2555 @ 15:44 BST Jun 7
- SUP 1: 1.2535 Low Jun 6
- SUP 2: 1.2459 Low Apr 21
- SUP 3: 1.2430 2.0% 10-dma envelope
- SUP 4: 1.2403 Low Apr 5 and key support
USDCAD maintains a softer tone and is trading closer to its recent lows. Price has shown below 1.2562, the 76.4% retracement of the Apr 5 - May 12 uptrend. A clear breach of this level would strengthen current bearish conditions and open 1.2459, Apr 21 low and potentially 1.2403 further out, the Apr 5 low and a key support. Key short-term resistance is seen at 1.2724, the 20-day EMA.
US TSYS: Turnaround Tuesday, 10YY Sub 3%, Stocks Extend Late Highs
Turnaround Tuesday lives up to it's name. Except for yield curves that finished near lows, rates stronger after the bell, near late session highs on strong volumes (TYU2>1.2M) w/bonds unwinding Mon's weakness. Current 30YY 3.1319% after nearly tapping Mon's 3.2044% high overnight; 10YY back below 3.0% at 2.9828% vs. 3.0621% overnight high.
- No specific driver for the reversal, trading desks say, though there are "big short positions per JPM survey .. while we usually rally through supply," on added, citing Tsy coupon auctions that start w/ $44B 3Y notes today.
- "Today is a buy everything day," another quipped as stocks extended session highs late (ESM2 +34.5 at 4154.5; Gold +13.00 at 1854.43; WTI crude +1.60 at 120.10.
- Treasury futures held gains after $44B 3Y note auction (91282CEU1) tailed: 2.927% high yield vs. 2.915% WI; 2.45x bid-to-cover vs. 2.59x last month.
- No react to limited data: US APR TRADE GAP -$87.1B VS MAR -$107.7B, nor Consumer credit ($38.1B).
- No react to Tsy Sec Yellen testimony to Committee on Finance, U.S. Senate, nothing really new as the former Fed chair touches upon supply constraints, chip shortages underpinning inflation. That said -- starting to see pick-up in stories suggesting global inflation may be topping out, Bbg citing semiconductor prices, spot rate for shipping containers and fertilizer prices plateauing.
US OUTLOOK/OPINION: Nordea: CPI To Display Further Stubbornly High Prices
- Nordea see CPI inflation coming in stronger than expected in May, with headline holding at 8.3% Y/Y (cons. 8.2%) and core only dipping from 6.2% to 6.1% Y/Y (cons. 5.9%) albeit with slight risk to the downside.
- The primary driver of headline is energy prices after a 9% gasoline price increase in May.
- Core inflation has recently seen a large pickup in stickier services categories, and housing components will rise in a similar fashion to April with a similar story in other services.
- Airline fares will moderate from April on lower jet fuels, but high frequency data shows high travel demand.
- Goods inflation will fall on a Y/Y basis but it’s still a matter of base effects rather than a sequential development.
- The Fed really needs to see deflating goods prices and service inflation not to accelerate further, yet service inflation is almost surely going to rise in the next months.
