The USD was the strongest of the major currencies coming into the US trading session and continued its run to the upside in the session. It is ending the day as the strongest. The GBP is the weakest.

The strongest to the weakest of the major currencies

Fundamentally, the gains in the US dollar were pushed by the realization that the Fed is surely not likely to cut until May/June after the stronger US jobs report on Friday. Fed's Powell laid the pip on Wednesday after the Fed rate decision when he said during the press conference - and reiterated it during his 60 Minutes interview over the weekend - that March is not the base case. The jobs report solidified that idea. Other Fed officials have not debated that point. Later this week we get comments from Mester, Barkin and Gov. Kugler (voting member). Barkin and Mester are not voting members (Mester is leaving the Fed as well). Nevertheless, more information is better than less human.

The other catalyst today was the ISM nonmanufacturing PMI which came in stronger-than-expected. More worrisome is that the price index rose to 64.0 from 57.4 last month. New orders were also stronger at 55.0 versus 52.8, and employment rose back above the 50 level at 50.5 versus 43.8 last month. Fast-break the other way for those key measures.

The data helped to not only send the USD higher but also interest rates. A snapshot of the US debt market currently shows:

  • two year yield 4.478%, +10.8 basis points
  • 5-year yield 4.124%, +13.1 basis points
  • 10 year yield 4.165%, +13.5 basis points
  • 30-year yield 4.347% +12.0 basis points

At the start of the trading day, the yields were at:

  • 2-year yield 4.449%
  • 5-year yield 4.083%
  • 10-year yield 4.119%
  • 30-year yield 4.303%

This week, the treasury will auction 3, 10 and 30-year coupon issues.

Have the yields backed up enough to satisfy the buyers?

The two-year yield is trading two basis points from its 2024 high yield of 4.494%. The high for the year for the 10-year is up at 4.196% (currently at 4.165%).

Stocks today moved lower but the declines were manageable especially given the rise in yields. The Dow was the weakest of the 3 indices but it was influenced by the sharp declines in McDonalds after disappointing earnings.

The broader S&P and Nasdaq also closed lower but well off the lows for the day. The final numbers are showing:

  • Dow down -274.30 points or -0.71% at 33013. At session lows, the index was down -434.03.
  • S&P -15.80 points or -0.32% at 4942.82. At session lows, the index was down -40.53 points
  • Nasdaq -31.29 points or -0.20% at 15597.67. At session lows the index was down -157.27 points.

Technically for some of the major currency pairs:

  • EURUSD: The EURUSD fell below its 100 day MA as 1.0776. Staying below is more bearish. It did find support buyers against the low from December at 1.07233. Moving below that level should increase the bearish bias.
  • GBPUSD: THe GBPUSD finally fell outside the 1.2600 to 1.2800 trading range and tumbled lower. The price also fell below the 200 day MA at 1.2560 on its way to the 38.2% of the move up from the October low at 1.25245. Stay below the 200 day MA keeps sellers more in control.
  • USDJPY. The USDJPY peeked above the high for 2024 at 148.80, to a new high for the year at 148.88. However, the price backed off and is trading at 148.68 going into the close. It would take a move back above 148.80 and staying above, to increase the bullish bias going forward.

Thank you for your support. Good fortune with your trading.