US TSYS: Pulled Two Ways By External Factors For Little Change Ahead Of CPI
- Cash Tsys have seen a decent run of cheapening pressure following stronger than expected UK labour market data early in European hours.
- It only takes them back to levels near unchanged on the day though after being helped richer by the PBoC following its well-documented PBoC cut to the 7-day reverse repo rate which was followed by heightened speculation surrounding the potential for wider policy easing (via BBG sources). That was in addition to cementing expectations for cuts to benchmark interest rates in the coming day along with a shallower than expected bounce in credit data through May.
- 2YY +0.0bp at 4.577%, 5YY -0.5bp at 3.888%, 10YY -0.2bp at 3.734%, 30YY -0.5bps 3.876%.
- TYU3 trades 5+ ticks higher at 113-17 in reasonably tight ranges with an earlier high of 113-22 only just poking above yesterday’s brief push higher. Volumes are close to recent averages but still subdued at 230k ahead of CPI. It maintains a bearish outlook with the key support level still close by at 112-29+ (May 26/30 lows), whilst resistance is seen at 114-06+ (Jun 6 high).
- Data: CPI clearly headlines at 0830ET, with real earnings hitting at the same time.
- Note/bond issuance: US Tsy $18B 30Y bond re-open (1300ET)
- Bill issuance: US Tsy $38B 52W bill, $45B 42D CMB (1130ET)
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US TSYS: Sentiment Sours, Projected Rate Cuts Moderate
- Treasury futures are holding near lows after the bell, curves flatter, extending inversion with the short end underperforming.
- There were no obvious headline or Block-driven trigger as projected rate cuts continue to climb off Thursday's lows given the rise in UofM's long term inflation expectations and cooling sentiment.
- Even Chicago Fed Goolsbee's comment on PBS over decelerating inflation failed to elicit much of a lasting reaction (though equities are rebounding at the moment: SPX Eminis -7.0 at 4137.0 vs. 4112.25 low).
- Yesterday saw three consecutive 25bp cuts projected to start in September.
- At the moment, however, September cumulative -20.9bp at 4.858%, November cumulative -44.1bp at 4.625%, Dec'23 cumulative -68.5bp at 4.381%, while Jan'24 cumulative is at -91.4bp (vs. 110.2bp Thu) at 4.153%. Fed Terminal currently at 5.08% in Jun'23 and Jul'23.
- White House Press Secretary Karine Jean-Pierre has told reporters that President Biden will meet with the four leaders of Congress "early next week" for a second round of talks on the debt limit, but declined to provide a specific date. Jean-Pierre: "When we have a date, certainly we will share that will all of you," adding that "productive talks" have been ongoing between negotiators representing all parties and will continue over the weekend.
USDCAD TECHS: Strong Bounce Sees Prices North of 50-Day EMA
- RES 4: 1.3695 High Mar 28
- RES 3: 1.3668 High Apr 28 and key resistance
- RES 2: 1.3640 High May 3
- RES 1: 1.3532 High May 12
- PRICE: 1.3532 @ 15:55 BST May 12
- SUP 1: 1.3363/15 Intraday low / Low May 8
- SUP 2: 1.3302 Low Apr 14 and a key near-term support
- SUP 3: 1.3275 Low Feb 14
- SUP 4: 1.3262 Low Feb 2
A strong rally in USDCAD extended Friday, tilting the pair to a new weekly high at 1.3532. This has eased recent bearish pressure. The pair has topped the 50-day EMA, at 1.3518. A clear break of this level would be seen as a short-term bullish development and signal scope for a climb towards resistance at 1.3668, the Apr 28 high. Key support lies at 1.3302, the Apr 14 low, where a break is required to reinstate a bearish theme.
AUDUSD TECHS: Corrective Pullback
- RES 4: 0.6921 High Feb 20
- RES 3: 0.6861 50.0% retracement of the Feb 2 - Mar 10 bear leg
- RES 2: 0.6824 High Feb 24
- RES 1: 0.6818 High May 10
- PRICE: 0.6651 @ 15:53 BST May 12
- SUP 1: 0.6651 Low May 12
- SUP 2: 0.6640/6565 Low May 4
- SUP 3: 0.6565 Low Mar 10 and the bear trigger
- SUP 4: 0.6547 61.8% of the Oct - Feb bull cycle
AUDUSD’s previous positive tone faded further Friday. This week’s test of key resistance at 0.6806, Apr 14 high, however, reinforces a bullish theme. A clear break of this level would strengthen the case for bulls and open 0.6861, a Fibonacci retracement. On the downside, a continuation lower would threaten the bullish theme and expose 0.6640, the May 4 low. Key support lies at 0.6565, the Mar 10 low.
