After last week US rates seems the best place to start
US 2-year yield: The initial target on the break of 4.70% here was 4.42-4.40%. Having hit 4.434% today, what are extended levels to look for IF 4.40% gives way?
4.34% is the 76.4% pullback of the 4.12-5.04% move . Below here would open up for a test of pivotal support at 4.12-4.13% (taking us dangerously close to "alarm Bell ringing" 140 bp's inversion to the Fed Funds rate.
A move below here and support at 3.55% comes into play again.
US 5-year yield: Trend line support is met at 4.07-4.09% and then horizontal support at 3.99%. Below there lies pivotal support at 3.75%
US 10-year yield: Strong support is met at 4.17-4.18% and then horizontal support at 4.03%. Below there lies pivotal support at 3.78%
In the near term a re-emergence of the Trump/Republican trade could also keep the long end a little softer helping curves to steepen.
US 2's5's curve: The important levels here remain minus 28 bp's and then minus 19 to minus 21 bp's
US 2's30's curve: Saw the double bottom hit its target of minus 6 bp's. At the same time it completed a bigger double bottom with the break of minus 8 bp's that suggests a further extension towards +22 to +24 bp's with the danger of an even bigger double bottom on a break of +6 to +9 bp's that IF seen could only be articulated as "trend changing"
US 10-year TIPS had their first close on a weekly basis under the 55 week MA last week since March 2022 with a wide gap to the 200-week MA suggesting a much more substantial fall could be in prospect
FX- lower rates may weigh further on the USD
The move lower in US yields has caused the US minus Germany 10 year spread to both narrow and complete a double top below 171 bp's that suggests a fall as low as 130 to 125 bp's.
The last time we were that low EURUSD rallied to 1.1276 (18 July last year). A break here of 1.0916 IF seen (76.4% pivot) would suggest an acceleration higher in this rally- possibly even as high as the July 2023 levels.
The collapse in the US-Japan 10-year yield spread since late April from 380 bp's to 312 bp's last week (together with renewed intervention) has finally taken its toll on USDJPY which tested very good support at 157.20-157.53. A break below, if seen, would suggest we could extend as far as 152 again.
EURJPY did post a bearish outside week at the trend high last week suggesting JPY outperformance could be seen for a while here
Support at 103.99-104.08 on the USD-Index now looks important in respect to the broad direction of the USD in the near-term
Commodities- Precious metals back center stage
Gold and Silver both completed double bottoms last week with targets of moves back to the trend highs at a minimum of $2,450 and $32.51 respectively
WTI failed to sustain a close above the 76.4% pullback level of $84.09 and Fridays high in itself stopped at a smaller 76.4% pullback at $83.64
A move back below a range of supports at $80/60 to $81 IF seen would make Oil look susceptible again
Equities remain resilient
Still look for now to likely react to the move lower in yields with some sector rotation rather than any core weakness evident. It still feels like it make take a bit longer for that weakness to manifest itself (maybe September time as we saw in 2000). A weaker economy/labor market with a Fed behind the curve would be an obvious catalyst for that.
A re-emergence of the "Trump trade" over the weekend with the implied fiscal implications/business friendly policies etc. May also provide some short-term buoyancy.
Rising trendline resistance on the SOX from 2022 at 6,050-6,109 might be worth watching in that respect.
