BONDS: Off Lows As Early Sell Off Stalls
German and UK yields generally tick higher vs. Friday’s close, taking cues from the U.S., before weakness in crude oil provides some counter.
- Weakness in Treasuries was perhaps linked to suggestions that U.S. President Trump can ultimately have little influence on the BLS data, despite the recent & incoming personnel changes (see our exclusive: Ex-Chief Says BLS Can Withstand Trump Pressure).
- An uptick in equity futures also weighs on bonds, with the above and Trump’s suggestions that he will likely leave Fed Chair Powell in post helping soothe risk appetite after Friday’s sell off.
- Bund futures as low as 129.50 before a recovery to 129.80, Initial support at the July 25 low and bear trigger (128.84) remains untouched,
- German yields flat to 2bp higher, curve steeper. 5s30s back towards 95 vs. closing cycle highs of 98.7bp.
- EGB spreads to Bunds little changed to ~2bp tighter, with the bounce in equities helping promote compression for the periphery (BTPs outperform, after 2bp tighter on the day) after Friday’s risk-off session.
- Gilt yields see a more parallel 1-2bp shift higher. Futures base around 91.25 before a recovery to 92.40. Initial support at the 20-day EMA (91.86).
- Modest hawkish adjustments in EUR & GBP STIRs, but both show a broadly unchanged picture, leaning towards 1 further ECB cut this cycle and 50bp or so of BoE easing through year-end (a BoE cut on Thursday remains over 90% discounted).
- U.S. durable goods (final) and factory orders highlights the macro calendar today.
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USDCAD TECHS: Trend Outlook Remains Bearish
- 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: 1.3674/3776 20- and 50-day EMA values
- PRICE: 1.3607 @ 16:12 BST Jul 4
- SUP 1: 1.3557 Low Jul 03
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
The trend needle in USDCAD points south and this week’s move down reinforces current conditions. S/T gains between Jun 16 - 23 appear to have been corrective. Key support and the bear trigger is 1.3540, Jun 16 low. Clearance of this level would resume the downtrend and open 1.3503, a Fibonacci projection. Pivot resistance is at the 50-day EMA, at 1.3776. A clear break of this average would signal scope for a stronger recovery.
AUDUSD TECHS: Bull Cycle Remains In Play
- RES 4: 0.6700 76.4% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6688 High Nov 7 ‘24
- RES 2: 0.6603 High Nov 11 ‘24
- RES 1: 0.6590 High Jul 01
- PRICE: 0.6548 @ 16:05 BST Jul 04
- SUP 1: 0.6521 20-day EMA
- SUP 2: 0.6468/6373 50-day EMA / Low Jun 23 and a reversal trigger
- SUP 3: 0.6357 Low May 12
- SUP 4: 0.6275 Low Apr 14
The trend set-up in AUDUSD remains bullish and the pair is holding on to its recent gains. The latest break higher maintains the bullish price sequence of higher highs and higher lows, the definition of an uptrend. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 0.6603 next, the Nov 11 2024 high. Key short-term support has been defined at 0.6373, the Jun 23 low.
EURJPY TECHS: Northbound
- RES 4: 171.88 High Jul 19 ‘24
- RES 3: 171.28 1.382 proj of the Feb 28 - Mar 18 - Apr 7 price swing
- RES 2: 171.09 High Jul 23 ‘24
- RES 1: 170.61 High Jul 03
- PRICE: 170.22 @ 16:04 BST Jul 04
- SUP 1: 169.04 Low Jul 02
- SUP 2: 167.87 20-day EMA
- SUP 3: 167.13 Low Jun 20
- SUP 4: 165.66 50-day EMA
EURJPY traded higher on Thursday resulting in a print above 170.47, the 76.4% retracement of the Jul 11 - Aug 5 sell-off. A clear break of this price point would strengthen bullish conditions and signal scope for extension. This would open 170.28 next, a Fibonacci projection. The trend is overbought, a pullback would unwind this condition. Support to watch lies at 167.87, the 20-day EMA.
