US yields are higherForex news for NY trading on May 12, 2021
- Major indices close at session lows. Lose 2%+ on the day
- Sour mood spreads to crypto as bitcoin nears the lows of the month
- Crude oil futures settle at $66.08
- David Einhorn makes the case for copper
- McConnell says GOP’s “red line” is repealing the 2017 Trump tax cuts
- Fed's Bostic: US in a 'turbulent time' and volatility in inflation is expected
- US treasury auctions are 41 billion of 10 year notes at a high yield of 1.684%
- Sen. GOP leader McConnell: There is bipartisan desire for outcome on infrastructure
- Biden set to meet with Congress on infrastructure, says will look for compromise
- European equity close: Decent bounce
- EIA US weekly oil inventories -427K vs -2100K expected
- Fed officials have cracked open the door to a climbdown on dovish stance
- Clarida Q&A: I was surprised by today's CPI number
- Rosengren says Fed considering issues around a central bank digital currency
- Fed's Clarida: Inflation rising above 2% is due to transitory factors
- US April CPI +4.2% y/y vs +3.6% expected
- The CAD is the strongest and the NZD is the weakest as the NA session begins
Recall last month the producer price index rose by greater than expected 1%. The ex-food and energy rose by 0.7%. Today the CPI data for April, seem to mimic those gains with prices moving to the consumer from the producer. The month-to-month change in headline CPI rose by 0.8%. The Ex food and energy rose by 0.9%. Inflation is shown its ugly head in the CPI data.
Those greater than expected gains, combined with base effect impact from the start of pandemic a year ago, led to a surge in the YoY headline to 4.2% from 2.6%. The ex food and energy rose to 3.0% from 1.6%. The last time the ex food and energy rate was this high was back in 1996.
The not so scary part of the report is that the gains seen this month came as a result of things like used cars which jumped 10%, and hotel rooms which rose 10.8%. The used car gain was responsible for over 1/3 of the rise this month. Will those types of gains continue moving forward or was it a one time impact from reopenings? Time will tell but as Fed's Bostic said today, the US is in a turbulent time, and volatility in inflation is expected (PS a year from now the base effect of losing a +0.9% may lead to the opposite fears).
Nevertheless, the market is not waiting. The dollar - after a volatile move up soon after the report, by a rotation back down - settled on taking the US dollar higher. Looking at the strongest to weakest rankings of the major currencies, the US dollar is the clear winner for the strongest, while the NZD and AUD are the winners on the downside.
Technically speaking:
- EURUSD: The EURUSD as settled below the 50% of the major trading range below 1.20815. The 200 hour moving averages just below that level I.20768. That is down from the high near 1.2150. In the new trading day if the price can remain below the midpoint at 1.20815, the sellers will be in firm control with the 100 day moving average of 1.20446 as the next major target.
- GBPUSD: The GBPUSD was slower to react to the downside, but is trading at session lows into the close, and is also trying to close below its 100 hour moving average of 1.40583 in the process a close below the 100 hour moving average would be the first since May 6. The next downside target would come in at 1.40262 at the 38.2% retracement of the month of May trading range. Should the price rebound instead, getting back above the 100 hour moving average, and then the earlier swing low from right after the CPI release at 1.40792 would be weaken a bearish bias.
- USDJPY: The USDJPY surged higher on the CPI report (from around 108.72), and in the process rose above the 200 hour moving average and a topside trendline on the hourly chart near 109.06. The price trended up to a high of 109.63 near the London close. In the New York afternoon, the price consolidated but consolidated above a swing area between 109.417 and 109.480. That area represented swing highs from May 4, May 5, and May 6 before the pair started its move to the downside last week. The swing area down to 109.417 represents close risk into the new trading day. On the topside not far from the current price of 109.64 since the swing high from May 3 at 109.693. Get above that level, and traders will start to target the swing on going back to April 2020 at 109.856. On the way to the years high at the end of March, the price stalled against that level before moving to the end of March high price for 2021 at 110.96.
- USDCHF: The USDCHF moved above a trio of moving averages including the 100 day moving average at 0.90794. The 200 day moving averages 0.90822, and the 200 hour moving average currently at 0.9081. The high price reached 0.9093 before rotating back down and trading above and below those three moving averages over the last few hours of trading. In the current bar however, the price is back above the moving average lines, and they will represent close risk for the new trading day. Stay above is more bullish. Move below with momentum and there could be some rotation and probing to the downside.
- NZDUSD> The NZDUSD fell from around 0.7230 just before release and is trading near lows at 0.7158 currently The low for the day reached 0.7151. The last seven or so hours so the pair move below its 100 day moving average at 0.71693. That is close resistance into the new day now (the price is trading at 0.7158 currently). On the downside, the 0.71495 level was swing low is going back to April 30 and again on May 5. Move below that level and it should open up the door for a run toward the 0.7132 area followed by the low for May and 0.71148.
- AUDUSD: The AUDUSD as move down from about the 0.7800 level to a low of 0.7719. That low stalled just ahead of its 100 day moving average at 0.77151. Needless to say, in the new day the 100 day moving average will be the barometer for the buyers and sellers. If the price can move below the 100 day moving average, the bears would be more control, with the swing lows from May 6 at 0.7700 and May 4 at 0.76745 as the next downside targets. On the topside resistance comes in the air 0.7756
In the US debt market, the U.S. Treasury auctioned off successfully $41 billion of 10 year notes. There was a negative tale of 1.4 basis points. The bid to cover ratio was comfortably above the six month average. Dealers took down much less than the six month average, and there was strong overseas demand. Nevertheless after a brief rally, yields started to inch back to the upside, and are trading at 1.693%, above the auction level 1.684%. That's up 7.2 basis points on the day. If the yield moves above 1.7%, the next target would be 1.8% followed by the natural resistance target at 2%. Below is a look at the changes in rates. The yield curve steep and between the 2-10 year from 146.29 to 152.86.
In other markets:
- Spot gold is trading down $21.87 or -1.19% at $1815.61. Clearly the price is reacting to the higher dollar/higher rates and the tick-up in inflation
- spot silver is down $-0.63 or -2.29% or $26.99
- bitcoin is losing ground and trades down to thousand $460 or -4.35% of $54,440. The high price did reach $58,041 before reversing back to the downside
- also reversing lower was Ethereum which traded to a new all-time high of $4380.64, but has given up those gains and currently trades at $4095, down $50 or -1.21%
