USD: Starts The Week Back Under Pressure, BBDXY Eyes The Lows Around 1200
The BBDXY range overnight was 1215.06 - 1218.30, Asia is currently trading around 1214. Asia opens under early pressure as trade friction between the US and China increases.
- (Politico) - “President Donald Trump said on Friday that he is doubling his tariff on steel to 50 percent, from 25 percent currently, to prevent billions of dollars worth of foreign steel from continuing to enter the United States.”
- U.S.-China Trade Truce Risks Falling Apart Over Rare-Earth Exports (WSJ): “A trade truce between the U.S. and China is at risk of falling apart, as China’s slow-walking on rare-earth exports fuels U.S. recriminations that China is reneging on the deal.”
- Bloomberg - “Scott Bessent said he’s confident the latest trade clash between Trump and Xi Jinping “will be ironed out” in a call “very soon.” He also told CBS’s Face the Nation the US “is never going to default” on its debt, while declining to say when the Treasury will run out of cash.”
- There is a broad consensus that the USD is set to embark on a decent move lower as the world reduces its exposure to the US and repatriates a lot of these flows.
- The market is still clearly focused on the “sell America” trade. What last week’s price action highlighted is the short-term market is all the same way so the frequency of sharp pullbacks will increase.
- The BBDXY rejected the 1125 area pretty strongly, the USD should continue to be met with supply should this 1225/30 area cap price. Focus will now turn back to the pivotal long-term support around the 1200 area.
Data/Events : Monday's highlights include the ISM Manufacturing survey and an appearance by Fed Chair Powell, with the June employment report looming at the end of next week.
Fig 1: BBDXY Weekly Chart
Source: MNI - Market News/Bloomberg
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Historical bullets
USDCAD TECHS: Hits Bear Trigger, New Cycle Low
- RES 4: 1.4415 High Apr 1
- RES 3: 1.4296 High Apr 7
- RES 2: 1.4087 50-day EMA
- RES 1: 1.3906/3935 High Apr 17 / 20-day EMA
- PRICE: 1.3793 @ 17:00 BST May 2
- SUP 1: 1.3760 Low Apr 21 and the bear trigger
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
The trend set-up in USDCAD deteriorated further Friday, with prices slipping through the bear trigger to narrow the gap with next support. The fresh cycle low reinforces the bear cycle and signals scope for a continuation near-term. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Moving average studies are in a bear mode position, highlighting a dominant downtrend. First resistance to watch is 1.3943, the 20-day EMA.
AUDUSD TECHS: Consolidation Phase
- RES 4: 0.6550 61.8% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6528 High Nov 29 ‘24
- RES 2: 0.6471 High Dec 9 ‘24
- RES 1: 0.6470 High May 2
- PRICE: 0.6445 @ 16:59 BST May 2
- SUP 1: 0.6344/6316 Low Apr 24 / 50-day EMA
- SUP 2: 0.6181 Low Apr 11
- SUP 3: 0.6116 Low Apr 10
- SUP 4: 0.5915 Low Apr 9 and key support
AUDUSD remains inside a consolidation phase, having traded either side of the 0.6400 level for 10 consecutive sessions. The underlying trend remains bullish and the pair is trading close to recent highs. Price has recently breached a key resistance at 0.6409, the Dec 9 ‘24 high. This breach reinforces bullish conditions and signals scope for a continuation higher near-term. Sights are on 0.6471 next, the Dec 9 2024 high. Initial key support to monitor is 0.6316, the 50-day EMA. A clear break of this EMA would be a concern for bulls.
US TSYS: Rates Retreat, Sentiment Improved Though Trade Risk Remains
- Treasuries look to finish near late Friday session lows after trading firmer on the open, higher than expected Nonfarm payrolls at 177k (sa, cons 138k) of which private contributed 167k (sa, cons 125k) triggered the early reversal.
- However, two-month revisions of -58k offset the 39k beat for nonfarm payrolls, with a similar story for private (a 42k surprise vs -48k two-month revision).
- Stocks are back near four week highs - pre-"Liberation Day" levels as hopes of some trade deal being made improved sentiment.
- The Wall Street Journal reports that "Beijing is considering ways to address the Trump administration’s gripes over China’s role in the fentanyl trade... potentially offering an off-ramp from hostilities to allow for trade talks to start." The Journal notes that "discussions remain fluid" and China "would like to see some softening of stance from President Trump".
- Currently, the Jun'25 10Y contract trades -20 at 111-07.5 vs 111-02 low -- initial technical support (50-dma) followed by 110-16.5/109-08 (Low Apr 22 / 11 and the bear trigger). Curves bear flattened, 2s10s -3.480 at 48.002, 5s30s -4.911 at 86.807.
