US TSYS: Persistent Inflation Concerns on Larger Than Expected Tariffs
- Treasuries look to finish near late session highs Wednesday, gathering risk-off support as Fed Chair Powell discussed his outlook at the Chicago Economics Club, stocks extended lows (but drew some buying late). Chairman Powell warned inflation may be more persistent due to larger than expected tariffs, exacerbated by policy uncertainty.
- "I do think we'll be moving away from" the dual mandate goals "probably for the balance of this year. Or at least not making any progress, and then we'll resume that progress as we can," Powell said.
- Treasury Jun'25 10Y futures trade +11 at 111-13.5 after the bell vs. 111-17.5 high, just off technical resistance at 111-25 (50.0% retracement of the Apr 7 - 11 bear leg), 10Y yield at 4.2806% (-.0524). Curves are steeper but off first half highs: 2s10s +1.691 at 50.081, 5s30s +4.769 at 83.808.
- The NY Fed services business activity index was weaker than expected in April as it failed to bounce and instead dipped to -19.8 (cons -12.1, 4 responses) after -19.3 in March. Other important details within the report were notably glum, with the current business climate falling further to -60.7 from -51.7 (-21.8 in Jan having averaged -24.5 in 2024 for example) to its lowest since Feb 2021.
- March industrial production was largely as expected, with headline IP growing contracting by 0.3% M/M (-0.2% survey) but prior upwardly revised by 0.1pp (+0.8%). Manufacturing production rose by 0.3% (0.2% survey 1.0% prior upwardly revised from 0.9%). Capacity utilization fell slightly (77.8% vs 78.2% prior).
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EURJPY TECHS: Bullish Structure
- RES 4: 164.55 High Jan 7
- RES 3: 164.08 High Jan 24 and a key resistance
- RES 2: 162.70 High Jan 28
- RES 1: 162.56 High Mar 17
- PRICE: 162.25 @ 16:28 GMT Mar 17
- SUP 1: 159.50 20-day EMA
- SUP 2: 158.74 Low May 5
- SUP 3: 155.60 Low Mar 4
- SUP 4: 154.80 Low Feb 28 and a bear trigger
A bull cycle in EURJPY remains in play and the cross is trading just ahead of last week’s cycle high. Price has recently breached a resistance at 161.19, the Feb 13 high. A clear break of the hurdle strengthens a bullish condition and opens 162.70 next, the Jan 28 high. On the downside, initial support to watch is 159.50 the 20-day EMA. Key support has been defined at 154.80, the Feb 28 low.
US: Voters Sceptical Of DOGE/Economy But Increasingly Think US Is On Right Track
A NBC News survey has found that, “voters are open, narrowly, to an effort to tackle inefficiencies in government. But they are concerned about billionaire Elon Musk and how his Department of Government Efficiency is executing those cuts”.
- The survey comes as Americans are increasingly sceptical of Trump's handling of the economy. The Hill notes, "the polls signal frustration over steep losses in the stock market and a potential trade war with some of America’s closest allies."
- More positively for Trump, NBC reports: “More registered voters say the U.S. is heading in the right direction (44%) than at any point since early 2004, though a majority (54%) still say the country is on the wrong track.”
Figure 1: "What best Describes what you Think About Elon Musk, DOGE, and their Efforts to Reduce Spending and the Size of the Federal Government
Source: NBC News
USDJPY TECHS: Shallow Correction
- RES 4: 154.80 High Dec 12 ‘24 and a key resistance
- RES 3: 151.45 50-day EMA
- RES 2: 150.18/151.30 High Mar 5 / 3 and a key near-term resistance
- RES 1: 149.46 20-day EMA
- PRICE: 148.55 @ 16:27 GMT Mar 17
- SUP 1: 146.54 Low Mar 11 and the bear trigger
- SUP 2: 145.43 2.0% 10-dma envelope
- SUP 3: 145.00 Round number support
- SUP 4: 144.13 76.4% retracement of the 16 ‘24 - Jan 10 bull leg
The trend direction in USDJPY remains down and the latest recovery appears corrective. A fresh cycle low on Mar 11 strengthens a bearish theme. The move down resulted in a print below 146.95, 61.8% of the Sep 16 ‘24 - Jan 10 bull leg. This opens 145.92 next, the Oct 4 2024 low. Moving average studies remain in a bear-mode set-up, highlighting a dominant downtrend. Key short-term resistance is unchanged at 151.30, Mar 3 high.
