LATAM FX: Price Signal Summary: USDCLP Is Off To The Races
- USDMXN short-term conditions remain bullish and the pair has traded higher today. The latest gains highlight a clear breach of resistance at 20.7014, the Jun 16 high. It is an important short-term hurdle and the break strengthens bullish conditions. This paves the way for a climb strength towards the 21.00 handle and 21.1071, the 1.00 projection of the May 30 - Jun 16 - 27 price swing. On the downside, key short-term support is seen at the 20-day EMA, at 20.2833.
- USDBRL traded to a fresh trend high once again last week, above 5.4000. Conditions remain bullish and this is also supported by a positive set-up in moving average studies. The focus is on 5.4795 next, 76.4% of the Dec ‘21 - Apr downleg. On the downside, initial support is seen at 5.2312, the 20-day EMA.
- USDCLP is off to the races once again and has gapped higher at the open. This marks an extension of the bull trend and maintains the current impulsive nature of the rally. The psychological 1000.00 handle has been cleared and attention turns to 1030.80, 2.236 projection of the Mar 29 - May 12 - Jun 3 price swing. Support has been defined at $942.25, the Jul 7 low.
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US: Def Sec Austin Delivering Remarks On Indo-Pacific Strategy
20:30 ET 01:30 BST: US Defence Secretary Lloyd Austin is continuing his ten-day tour of Asia with a speech at the IISS Shangri-La Dialogue in Singapore outlining "Next Steps for the United States' Indo-Pacific Strategy."
- The Secretary's speech will be livestreamed on the Pentagon website: https://www.defense.gov/News/Live-Events/
- Today, Austin met with Chinese counterpart Wei Fenghe to discuss "the need to responsibly manage competition and maintain open lines of communication."
USDCAD TECHS: Cements Short-Term Reversal
- RES 4: 1.3077 High May 16 and the bull trigger
- RES 3: 1.2982 High May 16
- RES 2: 1.2896 High May 18 and a key resistance
- RES 1: 1.2813 High Jun 10
- PRICE: 1.2792 @ 16:01 BST Jun 10
- SUP 1: 1.2518 Low Jun 8
- SUP 2: 1.2459 Low Apr 21
- SUP 3: 1.2403/02 Low Apr 5 and key support / 2.0% 10-dma env
- SUP 4: 1.2387 Low Nov 10. 2021
A sharp rally in USDCAD continued Friday, cementing the short-term reversal. Key near-term support has been defined at 1.2518, the Jun 8 low. An extension higher would signal potential for a climb towards resistance at 1.2896, the May 19 high. For bears, a resumption of weakness and a breach of 1.2518 would again expose 1.2459, Apr 21 low and 1.2403 further out, the Apr 5 low and a key support.
US TSYS: Hot CPI, 2Y Yld Over 3% First Time Since 2008
Rates extend lows after May CPI came out higher than est at 1.0% vs. 0.7% est, unrounded 0.974%, core 0.631%. Heavy short end selling on inflation surge has market expecting Fed to hike US into a recession.
- Notably, 2Y yield surged to 3.0611% - the highest level since 2008, while curves bull flattened after some initial volatility in the long end: 2s10s at 9.858 (-12.786) vs. 9.421 low, 5s10s inverted, flattening -7.273 at -9.761 vs. -10.722 low, while 5s30s slipped to inverted low of -6.661.
- Reaction spurred several dealers to up their rate hikes estimates with Barclays now sees a 75bp Fed hike next week. They have also raised their forecast for the terminal rate by 25bp to 3.00-3.25% in early 2023, implying 150bp of hikes after June's meeting. That's the most aggressive June FOMC hiking call that we are aware of, but markets are pricing in a modest chance of such a surprise (15-20% probability per futures).
- GS upped they're hike forecast to 50bp in June, July and September (from 50bp in Jun/Jul and 25bp in Sep).
