US TSYS: Off Lows But Still Bear Steeper, Mfg Surveys Headline Docket
- Treasuries are off lows although still sit bear steeper from Friday’s close in a “sell the US” theme following Trump’s doubling of steel and aluminum tariffs to 50% late Friday.
- It’s with a backdrop of the Trump administration’s higher growth rather than spending cuts approach to debt stabilization.
- Bloomberg earlier today on some major investment firms’ policies linked to long end woes: “For DoubleLine Capital, there are two approaches to consider when it comes to 30-year US Treasuries: either avoid them, to the degree they can, or outright short them.”
- Today sees manufacturing surveys in focus, with heightened sensitivity as markets assess the sector's ongoing handling of tariff policy changes and heightened uncertainty.
- Cash yields are 1.5-3.5bp higher on the day, with increases led by 10s through to 30s.
- 2s10s sits at 52.4bp (+1.5bp) whilst 5s30s at 98.0bps (+1.0bp) earlier touched a high of 100.23bps (ask price) to return close to ytd highs of 101.4bp on May 22.
- TYU5 trades at 110-21+ (-02+) off a low of 110-18 that equalled Friday’s low, on moderate volumes of 315k.
- Whilst a bear cycle remains in play, with support at 109-26 (May 29 low), last week saw a piercing of key resistance at 110-23 (May 16 high). Friday’s high of 110-30 now marks initial resistance before 111-05+ (May 9 high).
- Data: S&P Global US PMI mfg May final (0945ET), ISM mfg May (1000ET), Construction spending (1000ET)
- Fedspeak: Logan Q&A (1015ET), Goolsbee Q&A (1245ET), Powell opening remarks (1300ET, text only)
- Bill issuance: US Tsy to sell $76bn 13-W, $68bn 26-W bills
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Historical bullets
USDCAD TECHS: Hits Bear Trigger, New Cycle Low
- RES 4: 1.4415 High Apr 1
- RES 3: 1.4296 High Apr 7
- RES 2: 1.4087 50-day EMA
- RES 1: 1.3906/3935 High Apr 17 / 20-day EMA
- PRICE: 1.3793 @ 17:00 BST May 2
- SUP 1: 1.3760 Low Apr 21 and the bear trigger
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
The trend set-up in USDCAD deteriorated further Friday, with prices slipping through the bear trigger to narrow the gap with next support. The fresh cycle low reinforces the bear cycle and signals scope for a continuation near-term. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Moving average studies are in a bear mode position, highlighting a dominant downtrend. First resistance to watch is 1.3943, the 20-day EMA.
AUDUSD TECHS: Consolidation Phase
- RES 4: 0.6550 61.8% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6528 High Nov 29 ‘24
- RES 2: 0.6471 High Dec 9 ‘24
- RES 1: 0.6470 High May 2
- PRICE: 0.6445 @ 16:59 BST May 2
- SUP 1: 0.6344/6316 Low Apr 24 / 50-day EMA
- SUP 2: 0.6181 Low Apr 11
- SUP 3: 0.6116 Low Apr 10
- SUP 4: 0.5915 Low Apr 9 and key support
AUDUSD remains inside a consolidation phase, having traded either side of the 0.6400 level for 10 consecutive sessions. The underlying trend remains bullish and the pair is trading close to recent highs. Price has recently breached a key resistance at 0.6409, the Dec 9 ‘24 high. This breach reinforces bullish conditions and signals scope for a continuation higher near-term. Sights are on 0.6471 next, the Dec 9 2024 high. Initial key support to monitor is 0.6316, the 50-day EMA. A clear break of this EMA would be a concern for bulls.
US TSYS: Rates Retreat, Sentiment Improved Though Trade Risk Remains
- Treasuries look to finish near late Friday session lows after trading firmer on the open, higher than expected Nonfarm payrolls at 177k (sa, cons 138k) of which private contributed 167k (sa, cons 125k) triggered the early reversal.
- However, two-month revisions of -58k offset the 39k beat for nonfarm payrolls, with a similar story for private (a 42k surprise vs -48k two-month revision).
- Stocks are back near four week highs - pre-"Liberation Day" levels as hopes of some trade deal being made improved sentiment.
- The Wall Street Journal reports that "Beijing is considering ways to address the Trump administration’s gripes over China’s role in the fentanyl trade... potentially offering an off-ramp from hostilities to allow for trade talks to start." The Journal notes that "discussions remain fluid" and China "would like to see some softening of stance from President Trump".
- Currently, the Jun'25 10Y contract trades -20 at 111-07.5 vs 111-02 low -- initial technical support (50-dma) followed by 110-16.5/109-08 (Low Apr 22 / 11 and the bear trigger). Curves bear flattened, 2s10s -3.480 at 48.002, 5s30s -4.911 at 86.807.
