FOREX: USD Index Weaker, EUR/USD Challenging 50-day EMA, SEK Up 0.50%

• Tsys futures are trading slightly higher today, although ranges are narrow. Long-end contracts are outperforming, however all the gains were made on the opened, and we have since been slowly pairing those gains are the session has progressed. TU is +01⅛ at 102-17¼, while TY is trading +06 at 107-13+
• The trend in Treasury futures is unchanged and remains bearish. Yesterday’s bearish start to the week, has once again, confirmed a resumption of the downtrend. Sights are on 107-04 next, a Fibonacci projection. Note too that moving average studies remain in a bear-mode position highlighting a dominant downtrend. Key short-term resistance is seen at 108-26, the 20-day EMA.
• Cash tsys yields are slightly lower today, although still remain near Friday's highs. The 2yr is -0.2bps at 4.377%, while the 10yr is -1.2bps at 4.766%. The 2s10s is 1bp lower at 38.408.
• Trump's economic team is considering a gradual rollout of tariffs, increasing 2-5% monthly, to enhance negotiating leverage while minimizing inflation risks.
• Projected rate cuts through mid-2025 continued to retreat on Monday, we have given back about 1bp of that move through to June, however firmed 2bps for July vs. late Friday levels ()*: Jan'25 steady at -0.7bp, Mar'25 -5.4bp (-6.3bp), May'25 -9.5bp (-10.5bp), Jun'25 -17.3bp (-18.2bp), Jul'25 -20.2bp (20.2bp).
• Later today we have PPI & Federal Budget Balance, focus will then turn to Wednesday’s US CPI.

Oil benchmarks sit a touch off recent highs, although more so for Brent than WTI. Brent was last around $80.75/bbl, off around 0.30% for the session so far. WTI was close to $78.70/bbl. Both benchmarks remain within striking distance of recent highs, which came post fresh US sanctions on Russia at the end of last week. Elsewhere, gold continues to trade with a positive bias, up nearly 0.30%. Metals are mostly positive as well, with copper and iron ore up. 

• For WTI, upside focus is on $79.59, the Jul 5 ‘24 high, followed by $80.14, the Apr 12 ’24 high and a key medium-term resistance. Tanker rates have reportedly risen in response to US actions, while other measures of supply, like prompt spreads are also giving bullish signals for oil.
• Gold maintains its support on dips backdrop, last near $2670, up modestly in Tuesday trade to date. Recent resistance around $2700 remains intact. The softer USD backdrop is lending support to hold today, although better equity trends is likely aiding risk appetite (which can be a gold headwind).
• Copper has been aided by USD softness and the earlier reports of a gradual ramp up in tariffs by the returning Trump administration. CMX coper was last up 0.80% near $436.
• Iron ore has recaptured the $100/ton handle. A better China equity backdrop, amid multiple supports, is a positive, while since Q4 last year, Iron ore has been supported sub $100/ton. Yesterday's bumper iron ore import number for China for Dec is another positive. 

Today’s 5-year bond auction demonstrated mixed demand metrics, with the auction price surpassing dealer expectations of 100.07. However, the cover ratio declined significantly to 3.8158x from 4.4177x. Meanwhile, the auction tail was unchanged compared to last month at 0.01.

• These results contrast with the stronger demand observed in this month’s 10-Year bond auction.
• Given that today’s 5-Year offering was priced approximately 15bps higher than last month, marking a cyclical peak, the outcome is likely to be viewed as somewhat disappointing.
• Following the auction, the 5-Year JGB has richened slightly in early afternoon trading, while JGB futures have weakened, retreating to session lows.