FOREX: USD Rallies Despite More Benign Market Backdrop
Jun-23 09:35
- Despite a more benign-than-expected market reaction to the US strikes on Iran - particularly in the oil market - the USD is firmer against all others in G10 headed through to the crossover, staying favoured against all others amid higher geopolitical tensions. There remain several questions over the efficacy of strikes on Iran's nuclear sites over the weekend, but there are few signs of material retaliation from Tehran, despite full-throated threats and even warnings of the closure of the Strait of Hormuz in the hours after the attacks.
- For now, Trump's goals remain a return of Tehran to the negotiating table, or regime change away from the hardline approach of the current government.
- This price actions plays into the signals of a short-term base of the USD here - and a possible buy-on-dips pattern forming. We noted last week the importance of the USD Index showing above the downtrendline that's defined dollar weakness across Trump's term so far - and noted that even de-escalation headlines were proving insufficient to trigger any material weakness in the USD. This leaves 100.481 - 100.569 area as the next upside target and plausible resistance for a short-term bounce.
- With oil prices fully reversing their initial surge to start the week, and equity benchmarks remaining resilient to geopolitical developments, Japanese Yen weakness is continuing to standout. The break of a confluence of technical parameters has been assisting the move higher, namely the breach of the downtrend (drawn from the January highs) and the clean break of the May 29 high, cancelling the recent bearish theme.
- Preliminary June PMI data from the US is expected to confirm a slowing manufacturing sector but resilience from services, with existing home sales set to follow. Central bank speak Monday is headlined by ECB's Lagarde, who addresses EU parliament at 1400BST/0900ET, while Fed's Bowman speaks on monetary policy shortly afterward. ECB's Nagel, Fed's Goolsbee, Williams and Kugler also make appearances.
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JGB TECHS: (M5) Rallies off Lows
May-23 22:45
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.40 @ 15:42 GMT May 23
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows and for now, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US FISCAL: Total Tariff Income Jumping In May As New Rates Hit
May-23 20:54
Treasury reported a record $16.5B in customs/excise taxes on May 22, reflecting the large increase in tariff rates that went into effect in April.
- Today's report is important because it represents the largest tariff collections of the month which are typically on a due date around the 22nd, when most corporate importers make their payments.
- Thursday's one-day collection is a record, and the month has already set a new record. Tariff revenues have totaled $22.3B so far in May, and are came in at $17.4B in April (after averaging $8.1B/month in 2024).
- For the fiscal year as a whole so far, customs duties have totaled just under $93B, per the Treasury Daily Statement.
US FISCAL: Extraordinary Measures Continue To Dissipate Alongside Treasury Cash
May-23 20:35
Treasury's latest estimate of the size of "extraordinary measures" available to use "in order to prevent the United States from defaulting on its obligations as Congress deliberate[s] on increasing the debt limit" is down to $67B on May 21 (of an available $299B), vs $82B a week earlier.
- The amount hit the 2nd lowest level since the debt limit impasse started, at $46B, on May 20 (the low was $34B on Feb 24).
- With $476B in cash in the Treasury General Account on May 21, that left the total resources available to Treasury at $543B, the least since April 14 - the day before the annual April 15 tax deadline.
- Treasury Sec Bessent warned Congress earlier this month that "there is a reasonable probability that the federal government's cash and extraordinary measures will be exhausted in August while Congress is scheduled to be in recess. Therefore, I respectfully urge Congress to increase or suspend the debt limit by mid-July".
