LATAM FX: Price Signal Summary – USDMXN Bear Trend Remains Intact
- USDMXN continues to trade inside a range. Note that the pair has recently pierced the 50-day EMA, at 18.7800, however, this average, as a resistance, remains intact. A clear break of it would undermine the current bearish cycle and signal scope for a stronger corrective recovery. The resistance above the EMA to watch is 18.9810, the Aug 1 high where a break would further strengthen a bullish theme. This would open 19.3431, the Jun 23 high. On the downside, the bear trigger is 18.5109, the Aug 13 low. Clearance of this level would confirm a resumption of the primary downtrend and open 18.4302, the Aug 1 ‘24 low, and 18.1837, the 61.8% retracement of the Apr 9 ‘24 - Feb 3 bull leg.
- A bearish tone in USDBRL remains intact. A resumption of the downtrend would open 5.3153, the 61.8% retracement of the Jul 28 ‘23 - Dec 18 ‘24 bull cycle. Resistance to watch is at the 50-day EMA, at 5.4849. A clear break of this average would signal scope for a stronger short-term recovery and open 5.6301, the Jul 30 high.
- A bull cycle in USDCLP remains in play and recent weakness appears to be a correction. A key short-term resistance at 972.83, the Jul 14 high, has recently been cleared, confirming a resumption of the recovery that started Jul 2. Scope is seen for an extension towards 987.67, the 76.4% retracement of the sell-off between Apr 9 - Jul 2. Key support to watch is at 961.28, the 50-day EMA. A clear break of this average is required to signal a stronger reversal. This would expose 946.49, the Jul 23 low.
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AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
