BONDS: EGBs-GILTS CASH CLOSE: Bear Steepening With Multiple Factors At Play

• There was a substantial weakening of the US dollar on Monday, as reports from the Wall Street Journal detailed that President Trump was planning to issue a broad memorandum Monday that directs federal agencies to study trade policies, but stopped short of imposing new tariffs on his first day in office. Trump officials later corroborated the reports.
• The greenback was immediately lower on the headlines, and despite being off its worst levels, the USD index remains around 1% lower on the session.
• There has been broad based strength across G10 currencies against the dollar, however, EUR and NZD are outperforming at the margin. EURUSD rose to a session high of 1.0430 on the report as post-election positioning is taken into account and unwound. Initial resistance levels at 1.0338 and 1.0354 have been breached and the pair traded within 7 pips of 1.0437 resistance, the Jan 6 high.
• AUDUSD has risen above initial firm resistance in tandem, breaching the 20-day EMA and recording a high of 0.6287. The 50-day EMA is at 0.6335 and should be the next target barring any reversal of the current tariff rhetoric in place.
• With the strong positive price action for major equity indices, USDJPY is only 0.3% lower on the session at 155.85 as we approach the APAC crossover. Positive risk sentiment is boosting cross/JPY here and may be in focus as the BOJ decision approaches this week.
• Uk labour market data and Canadian CPI highlight the economic calendar on Tuesday.

• TYH5 saw 108-23 (+ 05+) at the early close, close to session highs of 108-24+ seen in sustained momentum originating from the WSJ reporting Trump would stop short of imposing new tariffs on day one.
• The contract has lifted a couple ticks on net since shortly prior to Trump’s address, having at one point dipped to 108-18 before swiftly reversing. There was little by way of details behind “we will tariff and tax foreign countries to enrich our citizens” and his speech contained few surprises.
• Resistance is seen at Friday’s high of 108-27+ before 109-06 (Dec 31 high) but gains are deemed corrective from a technical perspective, against a medium-term bear trend with support at 108-00 (Jan 16 low). It earlier saw a low of 108-08+.
• The MLK Day holiday has heavily depressed volumes despite the inauguration, with cumulative TY volumes tracking at only circa 35% of recent averages.
• Fed Funds futures meanwhile have seen cut expectations build today to 40bp for 2025 (again, all after the WSJ report) vs 38bp at the US crossover and 32bp prior to last week’s CPI report. A next 25bp cut from the FOMC is seen around June/July.

• RES 4: 1.0630 High Dec 06
• RES 3: 1.0568 High Dec 10
• RES 2: 1.0463 50-day EMA  
• RES 1: 1.0437 High Jan 6
• PRICE: 1.0399 @ 16:41 GMT Jan 20
• SUP 1: 1.0260/0178 Low Jan 15 / 13 and the bear trigger   
• SUP 2: 1.0138 1.764 proj of the Sep 25 - Oct 23 - Nov 5 price swing
• SUP 3: 1.0095 2.0% 10-dma envelope
• SUP 4: 1.0031 2.000 proj of the Sep 25 - Oct 23 - Nov 5 price swing    

The trend condition in EURUSD is unchanged, it remains bearish. For now, the latest recovery appears corrective, however, the pair has breached the 20-day EMA, at 1.0338, and pierced trendline resistance at 1.0403, drawn from the Sep 30 ‘24 high. A clear breach of the line would expose the 50-day EMA at 1.0463. Clearance of this average would strengthen a bullish condition. Key support and the bear trigger is at 1.0178, the Jan 13 low.