FOREX: USD Index Set to Post Lowest Weekly Close Since February 2022
Jun-27 17:15
- Softer than expected personal income data from the US offset a marginal uptick for Core PCE prints in May. The mixed data did little to enthuse an already subdued currency market on Friday, with the dollar index just 0.1% firmer on the session.
- Softer-than-expected Japanese data may be moderately boosting cross/JPY to finish the week. Tokyo’s core inflation slowed to 3.1% y/y in June from 3.6% in May. The core-core CPI, which excludes both fresh food and energy and is a key indicator of underlying inflation, also eased to 3.1% y/y in June from 3.3% in May. The likes of EURJPY and CHFJPY have been beneficiaries of this dynamic on Friday.
- Progress for CHFJPY specifically have been notable this week, and today’s advance looks set to extend the pair’s winning streak to seven consecutive sessions. CHFJPY has now rallied over 4% from the June lows to fresh record highs above 181.40.
- Today’s price action bridged the gap to the first notable projection level (from the Apr 25 - May 13 - May 23 price swing) at 181.35. Above here, the next objective is seen at 182.32.
- In emerging markets, the Colombian peso was a notable laggard on Friday following two rating downgrades from Moody’s and S&P.
- Overall this week, the dollar has resumed its downtrend, with the USD index set to close at its lowest weekly level since February 2022. Price action has propelled the likes of EURUSD above 1.17 and GBPUSD above 1.37, while USDCHF continued to plumb fresh 10-year lows and print below 0.8000.
- It is worth highlighting that next week’s US employment report will headline the economic calendar, notably scheduled on Thursday, owing to the July 4th holiday. China PMIs and German inflation data kicks thing off on Monday.
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US TSYS/SUPPLY: Record High Indirect Takeup Highlights Strong 5Y Auction
May-28 17:12
The 5Y Note auction was typically solid in May, with the 4.071% high yield representing a 0.4bp trade-through versus the 4.075% when-issued yield at auction cutoff.
- This was the 6th 5Y auction in the last 7 to trade through, and May's sale came with more solid peripheral statistics than usual:
- A record (going back to data from the early 2000s) high 78.4% takedown by indirects (seen by some as a proxy for foreign investors) was a highlight, and well up from the 69.0% prior 5-auction average.
- And primary dealers took down just 9.2% of competitives, below the 11.7% average of the prior 5 auctions, and the lowest since January 2023 - which was in turn the lowest on record (going back to the early 2000s).
- Bid-cover of 2.39x was exactly in line with the 5-auction average.
- Market reaction was positive: 5s richened about 0.5bp on the 2s5s7s butterfly, with 10Y yields down 1.4bp to 4.477%.
FED: US TSY 5Y NOTE AUCTION: HIGH YLD 4.071%; ALLOTMENT 23.12%
May-28 17:02
- US TSY 5Y NOTE AUCTION: HIGH YLD 4.071%; ALLOTMENT 23.12%
- US TSY 5Y NOTE AUCTION: DEALERS TAKE 9.24% OF COMPETITIVES
- US TSY 5Y NOTE AUCTION: DIRECTS TAKE 12.39% OF COMPETITIVES
- US TSY 5Y NOTE AUCTION: INDIRECTS TAKE 78.37% OF COMPETITIVES
- US TSY 5Y AUCTION: BID/CVR 2.39
EURUSD TECHS: Corrective Pullback
May-28 17:00
- RES 4: 1.1625 1.500 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 3: 1.1608 High Nov 9 2021
- RES 2: 1.1573 High Apr 21 and the bull trigger
- RES 1: 1.1453 76.4% retracement of the Apr 21 - May 12 bear leg
- PRICE: 1.1298 @ 16:16 BST May 28
- SUP 1: 1.1277 20-day EMA
- SUP 2: 1.1151/1.1065 50-day EMA and a pivot level / Low May 12
- SUP 3: 1.1026 38.2% retracement of the Feb 3 - Apr 21 bull cycle
- SUP 4: 1.0943 Low Apr 10
Trend conditions in EURUSD are bullish and MA studies are in a bull mode position, highlighting a dominant uptrend. The latest pullback is corrective. The Apr 21 - May 12 bear leg also appears to have been a correction. A resumption of gains would open 1.1453, a Fibonacci retracement. Key support is 1.1151, the 50-day EMA. A clear break of the average would highlight a stronger reversal and signal scope for a deeper retracement.
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