KRW: We Will Consolidate After The Recent Strong Run?
1 month USD/KRW continued to trade lower post the Asia close, we got to the 1236 handle. These were levels last seen on April 21.
- To recap, spot KRW has had its best 2-day run since mid-April. The cumulative gains in the past two sessions are just under 2.30%.
- We wouldn’t be surprised to see some consolidation following such a strong rally in the won. Early sentiment in equities is a little less buoyant with US futures coming off recent highs. The EU has unveiled its latest sanctions on Russia, which focus on oil import curbs for the reigon and de-Swifting some Russian banks.
- Yesterday, regional equity sentiment was quite buoyant though, with the Kospi at +1.2%. We saw +$361mn in net equity inflows yesterday. The strongest daily pace since late March.
- Earlier, South Korean industrial production figures showed a sharp contraction in the MoM print. It was down -3.3%, the steepest drop since 2020 and below -1.2% expectations. The YoY print held up well though at +3.3% versus +3.2% expected. The cyclical leading index came in at -0.3, the same as last month.
- China official PMIs are also due out later.
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USDCAD TECHS: Corrective Pullback
- RES 4: 1.2964 High Dec 20 2021
- RES 3: 1.2936 2.0% 10-dma envelope
- RES 2: 1.2901 High Mar 8
- RES 1: 1.2880 High Apr 28
- PRICE: 1.2804 @ 16:59 BST Apr 29
- SUP 1: 1.2648 50-day EMA
- SUP 2: 1.2568 Low Apr 22
- SUP 3: 1.2459 Low Apr 21
- SUP 4: 1.2403 Low Apr 5 and a key support
USDCAD remains bullish and added to the week’s gains Thursday. However, the pullback from 1.2880, Thursday’s high, highlights potential for a short-term correction. A key near-term support lies at 1.2648, the 50-day EMA. A clear break of this support is required to suggest scope for a deeper pullback. For bulls, a resumption of gains would refocus attention on 1.2901, the Mar 8 high. This is also the bull trigger.
US TSY FUTURES: BLOCK, Late 10Y Buy
- +7,500 TYM2 119-00.5, buy through 119-00 pst-time offer at 1551:35ET
US TSYS: Data-Driven Vol, Yields Higher, Stocks Extend Wk Lows
FI markets traded weaker after the bell, off early session lows amid data-driven vol in the first half. Quiet second half trade ensued even as equities fell back to late Tuesday levels (SPX -3.6% to 4128.0)
- Rates trade weaker, curves bear flattening with short end underperforming (Block sale: -10,000 TUM2 105-10.88, sell through 105-11 post-time bid at 0841:030ET) after Personal Income: +0.5%/MoM vs. +0.4% est, Spending +1.1%MoM vs. +0.6% est, PCE Deflator in line at +0.9%, Employment Cost Index is +1.4% vs. 1.1% est.
- FI levels rebounded sharply after April Chicago Business Barometer™ fell to 56.4 vs. 62.0 est. Prices Paid ticked up a modest 0.4 points to 86.1 with over three-quarters of firms citing higher prices this month. The Ukraine war was cited as inflating steel, plastics and lumber costs.
- Data driven volatility evaporated by midday with rates hold to a relative narrow range, yield curves flatter but off lows (2s10s -1.116 at 18.994 vs. 13.399L; 5s30 -1.867 at -3.742 vs. -6.508L).
- Focus turns to next Wednesday's FOMC policy annc, 50bp expected, Tsy refunding early Wednesday as well.
- The 2-Yr yield is up 7.7bps at 2.6943%, 5-Yr is up 7.3bps at 2.9124%, 10-Yr is up 5.9bps at 2.8811%, and 30-Yr is up 4.9bps at 2.9413%.
