US TSY FUTURES: Mix Of Positioning Moves Seen During Thursday's Twist Flattening

Bank of America note that “recently, the PBoC deputy governor stated that additional QDII quotas will be granted soon, allowing eligible domestic institutions to expand investment in foreign securities markets. We believe this shows that regulators are comfortable with the current state of exchange rate and therefore are shifting focus toward further opening up of the financial market”.

• Zooming out, they think “FX demand and supply dynamics will remain largely in balance. Any further increase in net USD selling from goods trade can potentially be offset by seasonal dividend-related outflows and rising outward portfolio flows”.
• As a result, they expect USD/CNY to remain range-bound between 7.10-7.30 in the near term.

• In the equity space, the trend condition in S&P E-Minis is unchanged, it remains bullish and this week’s fresh cycle high reinforces current conditions. Short-term resistance and a bull trigger at 6128.75, the Jun 11 high, has been breached. The clear break confirms a resumption of the uptrend that started Apr 7. Sights are on the 6200.00 handle, a 1.50 projection of the Apr 7 - 10 - 21 price swing. Key support remains at the 50-day EMA - at 5922.67.
• A short-term bear cycle in EUROSTOXX 50 futures remains intact, however, the recovery from Monday’s low appears to be a potential reversal. The contract has traded above the 20- and 50-day EMAs. A clear break of both averages would strengthen a reversal theme and signal scope for a stronger recovery. This would open 5486.00, the May 20 high and bull trigger. On the downside, a breach of Monday’s 5194.00 low would reinstate a bearish theme.

The gov't of PM Francois Bayrou is safe from a censure motion set to be put forward by the centre-left Socialist Party (PS) after the far-right Rassemblement National (RN, National Rally) confirmed that it would not vote alongside the parties of the left to remove the PM and his cabinet. Earlier today, RN Vice-President Sebastian Chenu told France Inter that it would wait until the next budget vote to back a censure motion against the PM, saying  "The meeting with censure is in the fall, at budget time. Francois Bayrou's turn will come (...) He should take this non-censorship as a real warning,". 

• The motion comes after a collapse in negotiations of the so-called 'conclave' comprising the governing parties, the PS, trade unions and employers' associations over possible changes to President Emmanuel Macron's pension reforms, which were pushed through parliament without a vote in 2023.
• Chenu's comments mirror those of RN President Jordan Bardella, who said "the budget will be the moment of truth" this autumn, adding that "given the way things are going, the government will not last very long."
• With the first anniversary of the snap legislative elections approaching in early July, Macron would be in the position to dissolve the National Assembly and call a new set of elections.
• Bayrou's approval ratings have tanked in recent months amid wrangling over the pension reforms and alleged mishandling of a child abuse scandal at a school in his former district.