US TSYS: Tsys Hold Higher Levels Ahead Midweek Data & Tsy Refunding Annc
- Treasuries look to finish modestly higher Tuesday - upper half of narrow session range as markets await Wednesday's non-government produced economic data: ADP employment, S&P Global US Services/Composite PMI and ISM Services as well as US Tsy Quarterly Refunding annc.
- Currently, the Dec'25 10Y contract trades +4.5 at 112-26 vs. 112-28.5 high, 10Y yield -.0272 at 4.0832%. The contract needs to trade above 113-18+, the Oct 28 high to signal a possible bullish reversal. Key resistance and the bull trigger is at 114-02, the Oct 17 high.
- The next two days see some private sector labor indicators that likely will see particular attention this week with a lack of BLS releases. ADP is expected to see some stabilization after recent job losses, with added questions over how its regular monthly report correlates with a newly published weekly series, whilst the Challenger report offers a look at hiring plans for a second important seasonal month.
- Analysts' outlooks for Wednesday's refunding reflect almost no expectations for any major changes, but there is increasing attention being paid to the likelihood of increased bill issuance ahead as coupon sizes aren't increased until well into 2026 at least.
- Greenback underpinned Tuesday, prompting the USD index to establish its position back above the 100 mark, at fresh recovery highs. The index traded to within 4 pips of the August 01 highs. Price action led an impressive lurch lower for spot gold, which briefly extended declines to 1.8% on the day to $3,930/oz.
- Stocks expected to announce earnings after the close include: Arista Networks Inc, Live Nation Entertainment, Corteva, Rivian Automotive, Advanced Micro Devices, American International Grp, Mosaic Co, Pinterest, Match Group, AES Corp, Super Micro Computer, Amgen Inc.
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JAPAN: Yen Slumps On Surprise Takaichi Victory, Focus On Fiscal/BOJ Outlook
Japan markets will be in focus in the first part of Monday trade, following Sanae Takaichi's victory in the weekend LDP leadership election. This is no doubt a surprise to the market given market odds, per Polymarket were firmly in favour of Koizumi winning the race. His odds were at 82 on Friday, versus Takaichi who was at low of 12 before Saturday's vote.
- An extraordinary session of the Diet will be held around Oct to choose a new PM. Goldman Sachs notes: "Since Ms. Takaichi has stated that the LDP and Komei coalition comes first, but would consider adding parties that share the same basic policy philosophy to the coalition, we assume that the minority government formed by the LDP-Komeito ruling coalition will continue, seeking cooperation from opposition parties on a case-by-case basis."
- However, it adds that given Takaichi's policy bias around pro-fiscal policy it could expand the coalition to include like minded parties, such as the Democratic Party for the People.
- This will be a key focus points for markets, given Takaichi's historical position around supporting fiscal policy to support growth. Her stance appeared to soften somewhat as the leadership campaign unfolded, she is expected to focus on cash handouts and tax rebates for households to reduce cost of living pressures. Via BBG: "While saying her spending plans will be “responsible” and that she’ll ensure the nation’s net debt load will fall over time, she said “the goal is achieving economic growth, not fiscal health,”
- This comes at a time when fiscal policy uncertainty has already been elevated in Japan, with the JGB yield curve just off historically steep levels.
- On the BoJ, via BBG: "In the latest leadership campaign, she toned down her scathing views on the Bank of Japan’s interest rate hikes from last year, when she described its raising of rates as “stupid.” But in a recent Kyodo survey she still said the BOJ should leave interest rates unchanged for now."
- This has helped drive USD/JPY higher this morning, up 1.4% to 149.50/55, with end Sep highs just short of 150.00 now in focus.
USDCAD TECHS: Fresh Cycle High
- RES 4: 1.4111 High Apr 10
- RES 3: 1.4045 3.0% Upper Bollinger Band
- RES 2: 1.4019 38.2% retracement of the Feb 3 - Jun 16 bear leg
- RES 1: 1.3989 200-dma
- PRICE: 1.3953 @ 16:02 BST Oct 3
- SUP 1: 1.3897/3825 Low Sep 30 / 50-day EMA
- SUP 2: 1.3727 Low Aug 29 and a bear trigger
- SUP 3: 1.3689 Low Jul 28
- SUP 4: 1.3637 Low Jul 25
A bull cycle in USDCAD remains intact and yesterday’s break above the late September’s high, firms the bullish theme. This move higher also maintains the bullish price sequence of higher highs and higher lows. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4019, a Fibonacci retracement point. On the downside, first key support lies at 1.3825, the 50-day EMA.
AUDUSD TECHS: Support Remains Intact For Now
- RES 4: 0.6763 1.382 proj of the Jun 23 - Jul 24 - Aug 21 price swing
- RES 3: 0.6726 1.236 proj of the Jun 23 - Jul 24 - Aug 21 price swing
- RES 2: 0.6660/6707 High Sep 18 / 17 and key resistance
- RES 1: 0.6629 High Sep 30 & Oct 01
- PRICE: 0.6603 @ 16:01 BST Oct 3
- SUP 1: 0.6527/21 61.8% of the Aug 21 - Sep 17 bull leg / Low Sep 26
- SUP 2: 0.6484 76.4% retracement of the Aug 21 - Sep 17 bull leg
- SUP 3: 0.6463/6415 Low Aug 27 / Low Aug 21 / 22 and a bear trigger
- SUP 4: 0.6373 Low Jun 23
The AUDUSD uptrend remains intact and recent weakness appears to have been a correction. Support to watch lies at the 50-day EMA, at 0.6558. A clear break of this average would signal scope for a deeper retracement and expose 0.6527 once again, a Fibonacci retracement. For bulls, a stronger reversal higher would refocus attention on 0.6707, the Sep 17 high. Initial resistance to watch is 0.6629, the Sep 30 and Oct 1 high.
