US TSYS: Well Off Early Lows Ahead Thanksgiving Holiday, Short Friday Month End
Nov-26 20:59
- Treasuries look to finish mixed - well off early session lows, curves flatter with the short end underperforming. Treasuries extend lows early Wednesday - earlier than expected UK OBR economic forecast got the ball rolling - growth forecasts cut.
- Second round of selling just prior to the Chicago PMI release, drawing mild buying after the lower than expected barometer decline of 7.5 points to 36.3 in November. The index is below 40 for the first time since January, and has remained below 50 for twenty-four consecutive months.
- Nascent month end selling and/or portfolio rebalance at play, stocks dipped as well before staging broad based rally into midday. Currently the TYH6 contract trades steady at 113-19 vs 113-08.5 low. Initial support below at 112-30, the 20-day EMA. Support at the 50-day EMA, lies at 112-25.
- Otherwise, a bullish theme in Treasuries remains intact and Tuesday’s gains reinforce current conditions. The recent breach of the 112-31 level, an area of congestion since Nov 5, marks an important short-term bullish development. This exposes 113-29+, the Oct 17 high and a key resistance.
- Latest weekly jobless claims data suggest lower layoffs than recent payrolls reference periods although re-hiring conditions remain subdued. It might see only limited improvement on net for the u/e rate since September’s surprise increase to 4.44%, a factor likely behind NY Fed Williams’ uncharacteristic steer to another “near term” cut last week.
- Core durable goods orders were stronger than expected in preliminary September data, rising 0.9% M/M (sa, cons 0.3) after an upward revised 0.9% M/M in Aug (0.4) – all in nominal terms.
- The latest Fed Beige Book (link): "Economic activity was little changed since the previous report, according to most of the twelve Federal Reserve Districts, though two Districts noted a modest decline and one reported modest growth."
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FED: Macro Since Last FOMC - Growth: Mixed Private Surveys
Oct-27 20:49
Taking up some of the data slack since the government shutdown heavily curtailed official data, private sector surveys have been mixed whilst the Fed’s Beige Book suggested softer activity.
- ISM manufacturing index was little changed in September at 49.1 (highest since February, albeit by 0.1pt) although the ISM services index disappointed as it dipped 2pts to 50.0 for its lowest since May with new orders fully rewinding what had been a strong increase in August for also back towards the breakeven 50 level.
- More encouragingly, the latest flash S&P Global US PMI surveys for October were robust with the composite rising to a three-month high of 54.8 on the back of services strength, but there remains a significant discrepancy between the optimistic PMIs and much more subdued ISM surveys.
- Meanwhile, consumer confidence softened slightly in October according to the University of Michigan and Conference Board’s consumer survey will be released on day one of the two-day FOMC meeting, although Powell has cautioned on the poor correlation with realized consumption.
- Looking at overall economic activity, the Beige Book reported that while the same number of districts (4) reported declining activity, this time 5 saw little/no change in activity (2 prior) and just 3 reported growth (vs 6 prior).
- Despite the more mixed evidence from recent private releases, the prior momentum in the economy has seen Fed officials including both Powell and Waller ponder the gap between strong economic data and a weak labor market, including which might be a more reliable indicator.
FED: Macro Since Last FOMC - Growth: Robust Official Data Before Shutdown
Oct-27 20:47
With the sole major inflation report accounted for (see 1547/49ET bullets), we now turn to activity and labor market developments seen since shortly after the last FOMC meeting.
- Activity data continued a theme of surprising robustness the week after the FOMC decision, with the third release of Q2 national accounts seeing real GDP growth revised higher again from 3.3% to 3.8% annualized.
- Consumption helped drive it and in turn painted a much more encouraging picture for final sales to private domestic purchasers – a favorite of Fed Chair Powell’s – at 2.9% (revised from 1.9%) after the 1.9% in Q1 and 2.9% averaged in 2024.
- The following day, the monthly personal income and outlays report for August suggested this robust consumption growth continued well into Q3, rising a strong 0.4% M/M.
- Beyond that however and we are largely in the dark when it comes to official data, although it’s left economic activity clearly on a strong footing with the last update from the Atlanta Fed’s GDPNow pencilling in real GDP growth of 3.9% for Q3.
AUDUSD TECHS: Bullish Theme
Oct-27 20:30
- RES 4: 0.6660/6707 High Sep 18 / 17 and a bull trigger
- RES 3: 0.6629 High Sep 30 & Oct 01 and key short-term resistance
- RES 2: 0.6574 50.0% retracement of the Sep 17 - Oct 14 bear leg
- RES 1: 0.6560 High Oct 27
- PRICE: 0.6554 @ 16:27 GMT Oct 27
- SUP 1: 0.6440 Low Oct 14
- SUP 2: 0.6415 Low Aug 21 / 22 and a bear trigger
- SUP 3: 0.6373 Low Jun 23
- SUP 4: 0.6357 Low May 12
AUDUSD continues to trade above its recent lows. Attention remains on the Oct 14 reversal pattern - a hammer candle. It signals the end of the bear cycle that started Sep 17. Note that the initial firm resistance at 0.6541, the 50-day EMA, has been pierced. A clear break of this hurdle would strengthen a bullish theme. For bears, a breach of 0.6440, the Oct 14 low, would instead cancel the reversal pattern and reinstate a bear threat.
