US TSYS: Tsys Yields Rise, Canada & Mexico Tariffs Delayed
- Tsys futures closed mixed on Monday, curves twist-flattened with front-end yields cheaper fueled by inflationary risk from tariffs and a risk-off bid coming into the long-end on growth concerns, while projected rate hike pricing through mid-year cooled. Large swings occurred following headlines Trump will delay tariffs on Mexico, while later in the session he announced tariffs will be delayed on Canada. TU closed -01¾ at 102-24¼, while TY closed +03+ at 108-30+
- There was a large bullish tsys options trade with expectations for a 10yr yield drop below 4% by Feb. 14. A trader bought 43,213 US 10-year Week 2 112.75 calls, with the strike implying a yield of ~3.95%. The $675,000 premium indicates a fresh bet on a bond rally. There was also a week 1 US bond put trade which targeted the 30yr yield rising to about 4.88% ahead of Wednesday's expiry.
- Cash tsys yields closed higher across all tenors with the 2yr +5.2bps at 4.249%, while the 10yr closed +1.6bps at 4.555%. The outperformance by long-end yields saw the 2s10s, 5s30s drop 5.5bps and 4bps.
- The fed's Goolsbee cautioned that the Fed should slow the pace of rate cuts due to rising uncertainty, particularly from Trump’s newly announced tariffs on Mexico, Canada, and China. While tariffs on Mexico and Canada have been postponed, Goolsbee highlighted the challenge of distinguishing between economic overheating and temporary trade-related effects. His comments align with Atlanta Fed’s Bostic and Boston Fed’s Collins, who also advocate a patient approach after 100bps of cuts in late 2024.
- Today we have Factory Orders & Durable Goods Orders
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JGB TECHS: (H5) Returns Lower
- RES 3: 149.55 - High Mar 22 (cont)
- RES 2: 147.74 - High Jan 15 and bull trigger (cont)
- RES 1: 144.48/146.53 - High Nov 11 / High Aug 6
- PRICE: 142.12 @ 15:01 GMT Jan 03
- SUP 1: 141.65 - Low Dec 30
- SUP 2: 141.56 - 1.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 141.05 - 2.000 proj of the Aug 6 - Sep 3 - 9 price swing
Markets slipped on the hawkish Fed and are yet to fully recover, touching 141.65 on the way lower. Medium-term trend signals on the continuation chart continue to point south. A resumption of the trend would pave the way for a move towards 141.56, a Fibonacci projection point on the continuation chart. A stronger recovery would open 144.48, the Nov 11 high. Further out, key resistance is at 146.53, the Aug 6 high (cont).
USDCAD TECHS: Bull Flag Highlights A Clear Uptrend
- RES 4: 1.4669 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4392 @ 15:50 GMT Jan 3
- SUP 1: 1.4336 Low Dec 20
- SUP 2: 1.4307/4232 20-day EMA / Low Dec 17
- SUP 3: 1.4136 50-day EMA
- SUP 4: 1.4011 Low Dec 5
USDCAD is unchanged and bulls remain in the driver’s seat. The latest pause appears to be a flag formation - a bullish continuation signal. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4307, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Southbound
- RES 4: 0.6471 High Dec 9
- RES 3: 0.6408 50-day EMA
- RES 2: 0.6341 High Dec 18
- RES 1: 0.6247/6282 High Dec 30 / 20-day EMA
- PRICE: 0.6204 @ 15:21 GMT Jan 3
- SUP 1: 0.6179 Low Dec 31
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
A bearish trend condition in AUDUSD remains intact and the pair continues to trade closer to latest lows. Recent weakness maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. Scope is seen for an extension towards 0.6158 next, a Fibonacci projection. Initial firm resistance to monitor is 0.6282, the 20-day EMA.
