US 10YR FUTURE TECHS: (U5) Clears Resistance

• In FX, recent weakness in EURUSD appears corrective. The trend structure remains bullish - moving average studies are in a bull-mode position signalling a dominant uptrend. The latest move down has also allowed an overbought condition to unwind. A resumption of gains would open 1.1608, the Nov 9 2021 high. Initial key support to watch is the 20-day EMA, at 1.1269. A break of this average would signal scope for a deeper pullback.
• The latest pullback in GBPUSD appears corrective. A tweezer top formation on the daily candle chart last Monday/Tuesday, highlights a short-term top. Firm support at 1.3232, the 20-day EMA, remains intact. A break of this level would signal scope for a deeper retracement. Note that moving average studies are in a bull-mode position, signalling a dominant underlying uptrend. A resumption of gains would open 1.3510, a 1.236 projection of the Feb 28 - Apr 3 - 7 price swing.
• The trend direction in USDJPY remains bearish and gains since Apr 22 are considered corrective. Price remains below resistance at the 50-day EMA, at 146.49. A clear break of this average would highlight a possible reversal. Moving average studies remain in a bear-mode position highlighting a dominant downtrend. A resumption of the trend would open 139.79 next, a 1.382 projection of the Feb 12 - Mar 11 - 28 price swing. First key support to watch is 141.97, the Apr 29 low.

• Treasuries are relatively little changed on thin volumes after another late open for cash markets (Japan today after Japan and London yesterday), broadly consolidating sizeable sell-offs seen since Thursday’s ISM manufacturing report.
• Today sees focus on Tsy Sec Bessent testifying to a House hearing at 1000ET before 10Y supply at 1300ET.
• Recall that last month’s 10Y auction helped stabilize particularly fraught markets, stopping through by more than 3bps and with an all-time high for indirect take-up (87.9%) having been watched closely as a proxy for foreign demand for Treasuries.
• Whilst looking at data that is increasingly in the rearview, today’s final trade data can also have implications for how we assess trade developments prior to April’s reciprocal policies.
• Cash yields are 1.2bp higher (2s) to 0.3bp lower (7s).
• TYM5 at 111-01 (-01) trades within overnight ranges on particularly low volumes of 200k.
• An overnight low of 110-27+ extended yesterday’s clearance of support at 110-30+ (50-day EMA) with a clear breach potentially strengthening a bearish threat to expose 110-16+ (Apr 22 low). To the upside, resistance at 112-01+ (Mar 2 high).   
• Data: Trade balance Mar (0830ET)
• Coupon issuance: US Tsy $42B 10Y Note auction - 91282CNC1 (1300ET)
• Bill issuance: US Tsy $70B 6W bill auction (1130ET)

Comments from Health Secretary Wes Streeting have added to speculation that the gov't could water down, or even fully reverse, its cuts to winter fuel payments for pensioners not in receipt of certain benefits. The Guardian reported on 5 May that the gov't is "rethinking its controversial winter fuel payment cut amid growing anxiety at the top of government that the policy could wreak serious electoral damage". Speaking to the BBC, Streeting denied that the policy is under formal review, but acknowledged that they are "reflecting on what the voters told us". 

• In the 1 May local council elections, the governing centre-left Labour party lost around two-thirds of the seats it was defending. The main winner was the right-wing populist Reform UK, while the centrist Liberal Democrats also performed well. Considering that the last time the councils were contested was 2021, when the centre-right Conservatives made significant gains as the COVID vaccine was rolled out, Labour's underperformance on 1 May becomes even starker.
• In an effort to save an estimated GBP1.4bln, Chancellor of the Exchequer Rachel Reeves announced the restriction in payments to those in receipt of pension credit and other benefits related to income.
• It is unclear whether a U-turn would be enough to revive Labour's flagging support, while it might also contribute to market jitters regarding Labour's commitment to its fiscal rules (note: Streeting said earlier the gov't was committed to the fiscal rules as-is)

Chart 1. Government Approval Ratings, %

Source: YouGov. Latest data 3-5 May