FED: MNI Fed Preview-June 2025: Dividing Lines

The Chicago Fed's National Financial Conditions Index (NFCI) was unchanged at –0.51 in the week ending June 20 in the latest update out today. This marks the "easiest" financial conditions since early 2022 by this measure ("negative values have been historically associated with looser-than-average financial conditions").

• The NFCI didn't really show that much tightness through the April equity / bond sell-off, merely returning to August 2024 levels. That's similar to other metrics such as Bloomberg's FCI, and echoes the St Louis Fed's Financial Stress index which has similarly retraced in an easing direction since April.
• The Fed's own financial conditions estimates - also updated today - barely got back to the "zero" level in March indicating financial conditions becoming a headwind to growth - the 1-year lookback impulse on growth was as "loose" in May as it's been in 4 months.
• Most FOMC participants describe current policy as "moderately/modestly/slightly" restrictive, with some eyeing policy as being increasingly close to neutral already. While restrictiveness does appear in some segments of the economy (most prominently housing), the broader scope of financial conditions certainly don't suggest any undue tightness.

• RES 4: 1.4111 High Apr 4
• RES 3: 1.4016 High May 12 and 13 and a key resistance 
• RES 2: 1.3920 High May 21 
• RES 1: 1.3821 50-day EMA
• PRICE: 1.3748 @ 16:49 BST Jun 25
• SUP 1: 1.3635 Low Jun 18  
• SUP 2: 1.3540/3534 Low Jun 16 / 1.0% 10-dma envelope
• SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
• SUP 4: 1.3473 Low Oct 2 2024

A primary downtrend in USDCAD remains intact and short-term gains are considered corrective. Resistance at the 20-day EMA, at 1.3713, has been breached. A continuation higher would signal scope for a stronger retracement. Pivot resistance to monitor is at the 50-day EMA, at 1.3821. Key support and the bear trigger has been defined at 1.3540, the Jun 16 low. Clearance of this price point would resume the downtrend.

• Treasury futures gradually climbed off midmorning lows after the bell, curves twisting steeper (2s10s +4.186 at 50.911) after the Fed SLR proposal to ease rules for large banks.
• Projected rate cut pricing gains slightly vs. early morning levels (*): Jul'25 at -6.2bp (-5.2bp), Sep'25 at -27.1bp (-25.8bp), Oct'25 at -42.7bp (-41.2bp), Dec'25 at -60.9bp (-59.7bp).
• Near the top end of a narrow session range, the Tsy Sep'25 10Y contract trades +2 at 111-23 (111-11.5L / 111-24H), volume just over 1.1M, 10Y yield -.0078 at 4.2867%. Key resistance remains above the intraday high of 111-24 at 111-30/31.5 (76.4% of May 1-22 downleg / 1.0% 10-dma envelope.)
• New home sales fell to an 18-month low in May, with the 13.7% M/M drop to 623k (seasonally-adjusted, annual rate) adding to evidence that overall US housing market activity is deteriorating.
• Cross asset: stocks flat to mixed (SPX eminis +1.75 at 6148.0; DJIA -101.5 at 42987.5, Nasdaq +48.77 at 19961.30), crude firmer after two day rout (WTI +.75 at 65.12), Gold firmer (+10.34 at 3334.01). After clinging to near steady at midday, the dollar index withdrew in the second half, nearing the prior session's 1W low (BBDXY -2.29 at 1199.24). Despite yesterday’s pullback, EURJPY has recovered strongly on Wednesday, rising 0.55% and back above 169.25.
• Heavy data tomorrow: weekly claims, GDP, Personal Consumption, Pending Home Sales, followed by several scheduled Fed speakers.