US TSYS: Twist Steepening Into Monthly Close
Treasuries twist steepened into the monthly close Friday.
- After a fairly flat overnight session, yields fell across the curve in early New York trade after President Trump posted on social media that China was in violation of its agreement set with the US, triggering a risk-off move.
- Yields would bounce back after PCE data came largely in line though April's trade deficit was much smaller than expected, later leading the Atlanta Fed to up its Q2 GDP growth nowcast to close to 4%.
- The Treasury bid was re-kindled in late morning, following weak MNI Chicago PMI data and a downward revision in UMichigan consumer inflation expectations, and as equities headed to session lows.
- But from there into the close, stocks and bonds decoupled (possibly the result of month-end dynamics), with the former rising to session highs while Treasuries merely consolidated earlier gains.
- Latest levels: the 2-Yr yield is down 3.5bps at 3.9037%, 5-Yr is down 2.8bps at 3.9686%, 10-Yr is down 1.2bps at 4.4063%, and 30-Yr is up 0.7bps at 4.9233%. The Sep 25 T-Note future is up 4/32 at 110-26, having traded in a range of 110-18 to 110-29.5.
- 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.
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AUDUSD TECHS: Northbound
- 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: 0.6450 High Apr 29
- PRICE: 0.6391 @ 16:50 BST Apr 30
- SUP 1: 0.6344/6310 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
The trend condition in AUDUSD 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 0.6310, the 50-day EMA. A clear break of this EMA would be a concern for bulls.
US LABOR MARKET: MNI U.S. Payrolls Preview: Tailwinds Ebb As Storm Gathers
We've just published our preview of the April employment report (which is released Friday). PDF HERE
- Nonfarm payrolls are seen increasing a seasonally adjusted 135k in April in the Bloomberg survey after a stronger than expected 228k in March.
- Primary dealer analysts also see 135k whilst the Bloomberg whisper is weaker again, currently at 120k.
- April won’t benefit from the favorable weather and returning strikers that helped March employment growth.
- Immigration restrictions are likely to increasingly drag on employment growth ahead although this month’s report could be a little early.
- There’s a similar argument for any adverse impact from tariffs, especially with weekly jobless claims proving robust. That said, some forward-looking measures look bleak.
- The unemployment rate is widely expected to round to 4.2% again after inching up to 4.15% in March from 4.14% in Feb. AHE growth meanwhile is mostly expected at 0.3% M/M with some mild downside skew.
- A solid report shouldn’t change the narrative ahead of next week’s FOMC meeting but a weak report might.
- Markets are pricing in nearly 70% probability of a cut by June, with 41bp through the end-July FOMC. Just over 100bp of cuts are seen through year-end, and we’ve seen the lowest terminal rates since September’s 50bp rate cut (around 3.00% per SOFR) as the negative growth impact of US tariff policy is assessed.
EURJPY TECHS: Resistance Remains Exposed
- RES 4: 165.43 High Nov 8
- RES 3: 164.90 High Dec 30 ‘24 and a key medium-term resistance
- RES 2: 164.55 High Jan 7
- RES 1: 163.76/164.19 High Apr 25 / High Mar 18 and the bull trigger
- PRICE: 161.80 @ 16:49 GMT Apr 30
- SUP 1: 161.43/159.48 50-day EMA / Low Apr 9
- SUP 2: 158.30 Low Apr 7 and key support
- SUP 3: 157.02 76.4% retracement of the Feb 28 - Mar 18 bull cycle
- SUP 4: 155.60 Low Low Mar 4
A bullish theme in EURJPY remains intact and short-term weakness appears corrective. Key short-term support lies at 158.30, the Apr 7 low. A break of it is required to signal scope for a deeper retracement. This would open 157.02, a Fibonacci retracement. First support to watch is 161.43, the 50-day EMA. Attention is on 164.19, the Mar 18 high and a bull trigger. Clearance of this hurdle would resume the uptrend.
