Intraday Market Thoughts

Bond Breaks Out, CAD Data Next

by Adam Button
May 18, 2018 10:27

The bond market continues to break down as US 30-year yields broke a major resistance level Thursday. Sterling was the top performer after some Brexit related news denials and confirmations, while the yen lagged. Key Canada CPI and retail sales data are due later today.  1 CAD Premium trade remains open.

The US 30-year yield has tried to break above 3.25% at least once in each of the past three years and consistently failed. That level also represents a long-term technical downtrend since the 1980s. On Thursday, the yield touched at high of 3.2545% compared to the 2015 high of 3.2546%. A break might open up a test of the 2014 highs near 4% and could signal a monumental shift in markets.

USD/JPY may already be signaling what will happen next. It rose for the fourth day on Thursday and posted the second close above the 200-day moving average. The US dollar was also lent some support from the economic calendar with the Philly Fed hitting 34.4 vs 21.0 expected.

EURUSD drops below 1.1800 after Italy's 5-Star Movement and far-right League published their joint government program, promising an escalation in govt spending that will re-awaken tensions with the European Union's budget criteria.

GBPUSD rose by a full cent to as high as 1.3580 in early Thursday on reports that the UK will stay in the EU Customs Union beyond 2021. The currency later fell after the reports were denied. Finally, sterling stabilized when the UK announced it would remain tied to EU customs union until the Irish border question is solved.

Later today, a critical set of datapoints from Canada is due as the final installments of top tier data before the Bank of Canada decision at month-end. CPI and retail sales are out at 8:30 EST, 12:30 GMT, 13:30 BST.

Act Exp Prev GMT
CPI (m/m)
0.3% 0.3% May 18 12:30

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