US: Trump SOTU Fails To Convince Voters He Is Focusing On Important Issues

• Extending the rapid spell of weakness, the USD index looks set to post another losing session on Monday. Last week’s developments surrounding Greenland, the rising potential of a Rieder-led Fed, growing risks of another gov’t shutdown and US & Japanese officials checking USDJPY rates last Friday have significantly worked against the greenback.
• The DXY has broken back below 97.00 and is around 0.5% below last Friday’s close. Price action has seen the index narrow the gap substantially to the September lows, which reside at 96.22. Furthermore, we are now testing back below a monthly support trendline (intersecting at 97.39), and a close below here at the end of the week/month would be a very bearish signal.
• JPY gains have been most notable on the day as markets assess the impact of both US and Japanese officials acting in tandem to curb recent USDJPY strength. Despite spot operating around 154 as we approach the APAC crossover, the pair slipped to a session low of 153.31, nearly 600 pips below last Friday’s peak following the BOJ decision. The sharp reversal Friday and today’s follow through has seen the pair trade through both the 20- and 50-day EMAs, bringing an end to the recent bull cycle. On the downside, we highlight the following three target levels:
  • Support 1: 152.82 Low Nov 7 ‘25  
  • Support 2: 150.99 Trendline support drawn from the Apr 22 ‘25 low
  • Support 3: 147.47 Pre-Election Close on Oct 03
• Further strength in AUDUSD today looks set to extend a winning streak to six sessions, resulting in the pair rising above 0.69 and trading within one pip of the 2024 highs, located at 0.6942. This is a key resistance point as we approach the key Australian Q4 CPI print on Wednesday.
• EURUSD also rose above the 1.19 handle for the first time since September, and will keep an eye on a 1.1919 break to garner the next upside momentum. Elsewhere, the Canadian dollar underperforms amid Trump’s most recent threat of 100% tariffs, translating into an unchanged USDCAD to start the week.
• The ramp higher for gold prices to above $5,100/oz continues to provide a very supportive backdrop for the South African Rand, prompting USDZAR to trade below the 16.00 handle for the first time since June 2022.

• RES 4: 112-31   High Dec 18 and key short-term resistance
• RES 3: 112-22   High Jan 7 
• RES 2: 112-11+ 50-day EMA 
• RES 1: 112-03   20-day EMA
• PRICE:‌‌ 111-26+  @ 16:50 GMT Jan 26
• SUP 1: 111-09   Low Jan 10 and the bear trigger
• SUP 2: 111-00   Round number support
• SUP 3: 110-30+ 1.618 proj of the Oct 17 - Nov 5 - 25 price swing  
• SUP 4: 110-22+ 1.764 proj of the Oct 17 - Nov 5 - 25 price swing

Treasuries have recovered from last week’s low print. A bear theme remains intact and short-term gains are considered corrective. Initial firm resistance is at the 20-day EMA, currently at 112-03. The 50-day EMA is at 112-11+. The area between the 20- and 50-day averages represents a key resistance zone.  For bears, a resumption of the bear leg would refocus attention on the bear trigger at 111-09, the Jan 10 low.

Tsy futures are holding firmer - inside session range with curves flatter (2s10s -1.227 at 61.683) ahead of the $69B 2Y note auction (91282CPV7) at 1300ET, WI currently at 3.597% -- 9.8bp cheap to last months tail.

• December recap: Tsy futures held modestly lower after the $69B 2Y note auction (91282CPS5) tailed slightly: 3.499% high yield vs. 3.497% WI; 2.58x bid-to-cover vs. 2.68x prior. Peripheral stats: Indirect take-up retreated to 53.21% from 58.07% prior, directs rose to 34.05% vs. 30.74% prior, primary dealer take-up 12.74% vs. 11.18% prior.

Note: The Treasury Dept issued a special announcement last Thursday, that today's 2Y note auction "could result in the unscheduled reopening of the 5-year notes of series U-2028 (CUSIP NO. 91282CGH8)" - if today's auction "results in a high yield in a range of 3.500% through and including 3.624%" - which already appears will be the case given the current WI.

• The Treasury added: any "additional issue of notes would have the same CUSIP number as the outstanding notes, which are currently outstanding in the amount of $42,990 million. If the auction results in the issuance of an additional amount of the outstanding 5-year notes rather than a new 2-year note, it will be indicated in the Treasury's auction results press release and by a special announcement. Any net long position reporting in this auction should be in regard to the 2-year notes."