EURGBP TECHS: Short-Term Pullback Extends
- RES 4: 0.9066/9266 High Sep 28 / High Sep 26 and key resistance
- RES 3: 0.8980 High Sep 29
- RES 2: 0.8867 High Oct 12
- RES 1: 0.8776/8829 High Nov 16 / 09 and the bull trigger
- PRICE: 0.8652 @ 15:45 GMT Nov 22
- SUP 1: 0.8613 100-dma
- SUP 2: 0.8560/59 Low Oct 31 / 76.4% of Aug 2 - Sep 26 rally
- SUP 3: 0.8522 Low Aug 30
- SUP 4: 0.8471 Low Aug 28
EURGBP edged lower Tuesday, breaking out of the recent tight range. The move lower extends the pullback from the 0.8829 high on Nov 9. A continuation lower would expose the Oct 31 low of 0.8560, where a break would resume bearish activity. Moving average studies remain in a bull mode position and this suggests that the broader uptrend is intact. A break of 0.8829 would be bullish.
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USDCAD TECHS: Finds Support At The 20-Day EMA
- RES 4: 1.4040 76.4% retracement of the 2020 - 2021 bear cycle
- RES 3: 1.4016 3.382 proj of the Aug 25 - Sep 7 - 13 price swing
- RES 2: 1.4000 Psychological round number
- RES 1: 1.3898/3977 High Oct 14 / 13 and the bull trigger
- PRICE: 1.3721 @ 16:29 BST Oct 21
- SUP 1: 1.3670 20-day EMA
- SUP 2: 1.3503 Low Oct 4 and a key support
- SUP 3: 1.3429 50-day EMA
- SUP 4: 1.3358 Low Sep 21
USDCAD traded briefly below the 20-day EMA Thursday. This average, at 13670, is an important S/T support. The uptrend remains intact and the latest pullback is considered corrective. The recovery from 1.3503, Oct 10 high, reinforces bullish conditions. MA studies still highlight an uptrend and 1.3838, Sep 30 high has been cleared. Should markets close below the 20-day EMA, a deeper correction toward 1.3503, Oct 4 low, would be on the cards.
US TSYS: Market Roundup: Dec 75Bp Hike Pricing Fades, Risk-On Cues
Tsys trade mixed after the close, yield curves broadly steeper as 2s through 10s finished broadly higher vs. continued weakness in long end 30Y bonds Friday.
Just minutes after yield hit new cycle highs (10YY 4.3354%) - yields reversed course (10YY 4.2188%) as short end surged following tweet from WSJ's Nick Timiaros:
- Some officials are more eager to calibrate their rate setting to reduce the risk of overtightening. But they won’t want to dramatically loosen financial conditions if and when they hike by 50 bps (instead of 75). This meeting could allow officials to get aligned on next steps."
- Some fast$/prop accts attempted to fade the move prior to a Large 2s30s steepener Block at 0935:14ET:(+11,470 TUZ2 102-62, through 102-01.75 post-time offer vs. -3,000 USZ2 118-19, through 118-22 post-time bid).
- Risk-on tail wind after San Francisco Federal Reserve President Mary Daly said Friday the FOMC needs to start considering a slowing the pace of interest rate hikes in order to avoid tightening monetary policy too much, adding the benchmark lending rate could reach 4.5% to 5% next year.
- “We don’t just keep going up in 75 basis point increments, we do a stepdown," she said. “That doesn’t mean step down as in pause and don’t raise, it means step down to increments that are easier to manage, 50, 25, where you’re still moving up but you’re doing it in a way that is not so aggressive.”
- After the bell, 2s10s curve was +12.828 at -25.775 vs. -38.595 inverted low.
US: Late Corporate Credit Update
Investment-grade corporate credit risk cooled Friday, back near October lows amid a cautious bounce in stocks as more hawkish (read: 75bp) year end rate hikes debated.
- Investment grade risk measured by Markit's CDXIG5 index is currently -4.398 at 94.703; CDXHY5 high yield index at 98.255 (+.857).
- Outperforming credit sectors (tighter or least wide): Technology and Industrials both +1.4 followed by Consumer Staples (+1.7).
- Lagging sectors (wider or least narrow): Subordinated Financials (+4.1), Materials (+3.6), Sr Financials (+3.5).
