GBPUSD TECHS: Resumes Its Downtrend
- RES 4: 1.2406 High Jun 16 and a key resistance
- RES 3: 1.2332 High Jun 27
- RES 2: 1.2213 High Jun 29
- RES 1: 1.2056/2141 High Jul 8 / 20-day EMA
- PRICE: 1.1859 @ 06:17 BST Jul 12
- SUP 1: 1.1846 0.764 proj of the May 27 - Jun 14 - 16 price swing
- SUP 2: 1.1795 0.764 proj of the Mar 23 - May 13 - 27 price swing
- SUP 3: 1.1777 Low Mar 26 2020
- SUP 4: 1.1673 1.00 proj of the May 27 - Jun 14 - 16 price swing
Trend conditions in GBPUSD remain bearish. The pair is trading at a fresh trend low and has resumed its downtrend. This marks an extension of last week’s move lower that resulted in a break of a bear trigger at 1.1934, Jun 14 low. The focus is on 1.1795 next, a Fibonacci projection. Weakness through here would open the Mar 26 2020 lows of 1.1777. Firm resistance is at 1.2141, the 20-day EMA.
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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).
