Making Sense

As identified in the last blog post, USD Index made a low of 100.51 on Tuesday and retraced to close the week at 101.732 . I will be closely looking at how the price action evolves around the 102.50 levels to re-initiate shorts. In my post earlier, we identified the first braking zone to the downward momentum on USTs as the 3.64% - 3.81% zone where US2s found resistance. During the week,  Yields on US2s dipped to 3.848% before closing the week at 3.92% inside of the 3.90% - 4.10% range seen for better part of the month. The steepening trend persisted this week as the US2s10s closed the week at -0.014%. On US10s, yields moved higher to close the week at 3.907%.  I'm looking at 2 spots to re-initiate trades on US2s ~ 4.10% and 4.20% handle.  The break in US2s10s outside of the triangle targets 15.50 bps.  US economic data shows a softening trend but it does not outright suggests a sharp deceleration to warrant further pricing of rate cuts. The thought is predicated o...

"If you can trust yourself when all men doubt you, B ut make allowance for their doubting too;    If you can wait and not be tired by waiting..... If you can fill the unforgiving minute,  With sixty seconds’ worth of distance run,    Yours is the Earth and everything that’s in it...." ~ Rudyard Kipling  Let's Quickly review the U.S Economic Data released over the week.  The GDPNow Model estimate for real GDP growth in Q2 was revised downwards to 3% after the release of the data this week. CBO estimates show that U.S Budget Deficit will be around $ 400 bn larger this year at $ 1.90 trn.  USTs consolidated last week's gains in a 9.50 bps range and US2s10s closed relatively unchanged for the week at - 48 bps and DXY continued to climb higher after taking support at the 103.00 level at the start of the month and S&P 500 made fresh highs at 5517. On the DXY, 106.25 is a crucial resistance zone for DXY bears and an important point of reversal. S...

  Moves in US2Y stalled ahead of the 78.60% Fibo retracement of the 5.26% to 4.15% and have been congesting around the 4.90% - 5.00% over the last 6 trading days. US10Y found support at the upper end of the trend channel. Interestingly, also look at the TLT chart 20+ Year Treasury Bond ETF which has moved back within the channel. USD index saw a pullback from 106.52 (88.6% of the Fibo move from 107.35 to 100.62. I have been writing about the 106.45 - 106.75 zone as the level to look for to get a potential turn / correction in the USD index. The next crucial resistance on the pair will be previous highs at 107.35. For 107.35 levels to be truly taken out, watch for a strong catalyst - may be tensions in ME blow out crude goes to $ 100 levels etc..  So now we know the levels, we have some evidence of levels holding up, reckon we can play for tactical USD shorts with tight stops.

Over the week, US2s found support at the 4.75% level and US10s found support ahead of the 4.35% level.  U.S Monetary policy is in a restrictive territory and Fed projections show 75 bps of rate cuts into 2024. Stickiness of Inflation and reaching the last mile of inflation is a dominant concern for the Federal Reserve and the same has resonated in the Fed Speak. Fed's Barkin commented "I am in no hurry to cut rates" as echoes by Fed Williams and Fed Bostic.  However, the market paused repricing Fed Fund Rates over 2024 as the pricing largely converged with the Fed Projections.   USD index languished between the 103.60 and 104.25 levels. Fed Fund pricing for rate cuts into 2024 largely hovered around the 80 bps mark over the week before slipping to 92 bps post the ISM Mfg Release with 25 bps of rate cuts fully priced into the June meeting.  Yields High Low Close WoW ▲ Weekly Range US 2Y ...

US2s10s further flattened 3.70 bps as the front end of the curve lead the losses while US10s were broadly unchanged. The market implied cumulative pricing for rate cuts was further pared down with market now pricing in 78 bps of rate cuts and with the first cut fully priced in for July policy meeting .  Yields High Low Close DoD ▲ US 2Y          4.73          4.65          4.71                 4.40 US10Y          4.35          4.30          4.33             ...