UK: Week Ahead

Mar-25 11:08
  • Looking at the upcoming week, there is only one MPC member scheduled to make a public appearance. Catherine Mann will appear at the Royal Economic Society Annual Conference (it is unclear whether as an outright speaker or as a panellist). Previously she had described her February decision to continue to vote for a hike as “finely balanced” but had given little other indication that she would change her vote at the March MPC meeting. She has, however, sounded very far from cutting rates in her appearances since February, so we will wait to see if she discusses monetary policy today and whether she addresses her vote change at last week’s meeting. There is no text expected to be released.
  • On the data front this week’s calendar is relatively light with CBI distributive trades due today and the final print of Q4-23 GDP due Thursday morning (with little in the way of revision expected). We don’t expect either to really be market moving.
  • Today will see the last GBP650mln long-dated APF operation (before the size reduction next quarter) with the final auction of the short 5-year (closer to 4-year now!) 4.50% Jun-28 gilt due tomorrow.
  • Note that following the large takeup at the linker syndication, the DMO is on track to overfund in the gilt market for FY23/24 by GBP1.8bln (which could increase to around GBP2.5bln if the full PAOF is taken up this week). The DMO will take this overfunding into account when it revises its remit following the outturn of the public finance data for the fiscal year (which is due for release on 23 April).

Historical bullets

USDCAD TECHS: Support Remains Intact

Feb-23 21:00
  • RES 4: 1.3661 High Nov 27
  • RES 3: 1.3623 61.8% retracement of the Nov 1 - Dec 27 bear leg
  • RES 2: 1.3608 High Dec 13
  • RES 1: 1.3586 High Feb 13
  • PRICE: 1.3508 @ 16:39 GMT Feb 23
  • SUP 1: 1.3413/3359 Low Feb 09 / Jan 31 and key S/T support
  • SUP 2: 1.3343 Low Jan 12
  • SUP 3: 1.3288 Low Jan 5
  • SUP 4: 1.3229 Low Feb 1

The USDCAD trend structure remains bullish despite the sell-off late last week as well as through the Thursday open - a correction. Tuesday’s softer-than-expected CPI works in favour of further gains. The pair traded higher Tuesday resulting in a break of resistance at 1.3544, the Feb 5 / 6 high and bull trigger. This confirms a resumption of the bull cycle that started Dec 27 and opens 1.3623, 61.8% of the Nov 1 - Dec 27 bear leg. On the downside, key support to watch lies at 1.3359, the Jan 31 low. Initial firm support has been defined at 1.3413, the Feb 9 low.

AUDUSD TECHS: Firmer Close Despite Bearish Trend Signals

Feb-23 20:30
  • RES 4: 0.6900 High Jun 16 and a key resistance
  • RES 3: 0.6871 High Dec 28 and the bull trigger
  • RES 2: 0.6729/71 High Jan 12 / 3
  • RES 1: 0.6625 High Jan 30 and key resistance
  • PRICE: 0.6561 @ 16:38 GMT Feb 23
  • SUP 1: 0.6443 Low Feb 13
  • SUP 2: 0.6412 76.4% Fibonacci retracement for Oct - Dec upleg
  • SUP 3: 0.6360 Low Nov 14
  • SUP 4: 0.6339 Low Nov 10

AUD/USD rallies were sold into the Thursday close, with prices returning negative despite printing a new multi-week high at 0.6595. Further losses would see the bearish trend resume, confirming the latest bounce as corrective. Last Tuesday’s initial break lower reinforced the bearish theme. To the downside, sights rest on 0.6412, a Fibonacci retracement. Moving average studies are in a bear-mode set-up, highlighting a clear, albeit weaker, downtrend. Key resistance to watch is 0.6625, the Jan 30 high. Initial resistance is at 0.6546, the 20-day EMA and a level pierced this week.

US TSYS: Markets Roundup: Tsys Off Lows, Risk Unwinds Into Weekend

Feb-23 20:21
  • Not much of a change since midday where Treasury futures climbed to session highs after a weaker open where Mar'24 10Y futures tapped the lowest level since late November '23.
  • Treasury curves bull flattened (2s10s -4.271 at -43.590 -- Jan 3 low) on the bounce, no obvious headline driver, though trading desks widely citied a (modest) reversal in equities off contract highs as trading accounts took profits ahead the weekend.
  • Mar'24 10Y futures had tested Thursday lows overnight (109-09) neared the 110 handle in late trade, climbing to 109-31 (+15), 10Y yield -.0629 at 4.25789%. Heavy volumes (TYH4>3.8M) tied to the roll to Jun'24 contract continues. Technical resistance above at 110-15.5 (20-day EMA).
  • Projected rate cut pricing holds steady for the next couple meetings while June is off this morning's lows: March 2024 chance of 25bp rate cut currently -2.0% w/ cumulative of -0.5bp at 5.324%; May 2024 at -21.2% w/ cumulative -5.8bp at 5.271%; June 2024 -62.6% vs. -55.4% earlier w/ cumulative cut -21.4bp at 5.132%. Fed terminal at 5.33% in Feb'24.
  • Look ahead: Next Monday sees New Home Sales (680k est vs 664k prior), MoM (2.4% est vs. 8.0% prior) at 1000ET, followed by Dallas Fed Mfg Activity Index at 1030ET. Flurry of Treasury auctions start Monday due to the short month: $63B 2Y note and $70B 26W bills at 1130ET, followed by $79B 13W bills and $64B 5Y Note auctions.