Updated: 08-21-2014

The Market at 11:40AM ET
10-Year: +02/32…2.418…
EUR/USD: 1.3284…
USD/JPY: 103.80…

Moving the Market

Initial Claims: Actual 298K, consensus 308K, prior 311K (revised 312K)

Continuing Claims: Actual 2500K, consensus 2530K, prior 2544K (revised 2549K)

Existing Home Sales: Actual 5.15M, consensus 5.00M, prior 5.04M

Philadelphia Fed: Actual 28.0, consensus 15.5, prior 23.9

Leading Indicators: Actual 0.9%, consensus 0.7%, prior 0.3% (revised 0.6%)

KC Fed's Jackson Hole Symposium

11:40AM ET

Treasuries See Small Bid:
  • Treasuries hold near their best levels of the session amid a muted trade. 
  • Today's action is likely to remain uneventful as traders await tomorrow's speech on labor markets by Fed Chair Janet Yellen at the Jackson Hole Symposium
  • Early action has yields across the curve down close to -1bp. 
  • Up front, the 2y is -0.4bps @ 0.468%. Some overnight weakness provoked a test of the 0.500% resistance level, but the yield has since pulled back. 
  • A flat session in the belly has the 5y @ 1.630%. Resistance in the 1.640% area remains in focus as both the 50 and 100 dma also lurk in the vicinity. 
  • The 10y trades -0.5bps @ 2.421%. The benchmark yield probed resistance near 2.440%, but has been unable to reclaim the level. 
  • Outperformance at the long end has the 30y -1.3bps @ 3.207% as action slips off one-week highs. 
  • Little change along the curve has the 2-10-yr spread holding @ 195.5bps.
  • Precious metals remain under pressure with gold -$17 @ $1278 and silver -$0.13 @ $19.37.

10-Yr: +02/32… EUR/USD: 1.3284… USD/JPY: 103.80…

11:18AM ET
DXY Slides Back From Multi-month Highs Ahead of Yellen: The Dollar Index is giving up some of its overnight gains despite strong economic reports. The DXY rallied to multi-month highs once again as it touched 82.36 following Fed minutes, which were viewed as hawkish compared to recent Fed commentary. The Index hit highs during Asian trade, but would begin to see some selling pressure when Europe opened for trade. That trend would continue despite outperformances in initial claims, existing home sales , leading indicators, and the Philly Fed. The latter is being questioned though as the underlying components did not match the impressive headline numbers. The DXY is dipping back to 82 and should give that level a strong test for support ahead of tomorrow speech by Fed Chair Janet Yellen (10am). 

  • The euro dropped to 1.3240 in early trade before recovering losses. The single currency was aided by PMI numbers, which were not great compared to the consensus expectations but were better than some had feared. The euro was able to rally back to 1.3285 but is running into some resistance here. Tomorrow, ECB President Mario Draghi will be speaking and markets will be listening closely to comments on how he intends to implement QE to boost the struggling region. 
  • The pound saw little support from the dovish BoE minutes and fell below 1.6600 for the first time since early April. Sterling has now fallen below its 200 dma and continues to see a firm downward trend. A slowdown in economic data has hurt sterling as has the slowdown in the euro area. Also weighing on sentiment is the Scotland independence situation which remains in the headlines. 
  • The yen is breaking down from its recent tight consolidation range as it slips further down the 103 level. The yen came within a whisper of the 104 level this morning, hitting 103.95 before seeing a small bounce back. A preliminary look at Manufacturing PMI data came in better than expected.

10-Yr: +02/32… EUR/USD: 1.3286… USD/JPY: 103.73…

10:05AM ET
Treasuries Firm as Data Tops Estimates:

  • Treasuries ticked to their best levels of the session as equity markets opened with gains and are holding at those levels following the trio of better than expected data in the form of existing home sales (5.15 mln actual v. 5.00 mln expected), Philly Fed (28.0 actual v. 15.5 expected), and leading indicators (+0.9% actual v. +0.7% expected). 
  • Light buying has yields across the complex lower by close to -1bp with the 10y @ 2.417%. 
  • A slightly steeper curve remains in play as the 2-10-yr spread trades 196bps.
  • Precious metals hold in the red with gold -$19 @ $1276 and silver -$0.09 @ $19.40.

10-Yr: +03/32… EUR/USD: 1.3268… USD/JPY: 103.71…

08:36AM ET

Treasuries Tick Higher as Claims Data Tops Estimates:
  • Treasuries are seeing a small bid following the better than expected initial (298K actual v. 308K expected) and continuing (2500K actual v. 2530K expected) data.
  • Maturities across the complex drift little changed with none seeing their yield more than 1bp above its respective flat line.
  • The 10y holds @ 2.434% and continues to test resistance in the 2.440% area. 
  • A slightly steeper curve remains in play as the 2-10-yr spread trades 197bps. 
  • Precious metals hold near their lows with gold -$19 @ $1276 and silver -$0.15 @ $19.35. 
  • Existing home sales, Philly Fed, and leading indicators will cross the wires at 10am ET.

10-Yr: unch… EUR/USD: 1.3268… USD/JPY: 103.77…

07:56AM ET

Peripheral Yields Push Lower:
  • Yields are mixed across Europe as light selling takes place in the core while buyers are in control in the periphery. 
  • Eurozone Flash Manufacturing (50.8 actual v. 51.4 expected, 51.8 previous) and Services (53.5 actual v. 53.6 expected, 54.2 previous) both fell short of estimates
  • German Bunds hold small losses following the better than expected manufacturing (52.0 actual v. 51.7 expected, 52.4 previous) and services (56.4 actual v. 55.5 expected, 56.7 previous) data. A +1bp advance has the 10y @ 1.000%. 
  • UK Gilts are slipping after the retail sales (0.1% MoM actual v. 0.4% MoM expected) and public sector net borrowing (-GBP1.1 bln actual v. -GBP1.9 bln) misses. The 10y is higher by +1bp @ 2.435%. 
  • Light selling has French OAT yields ticking higher following the manufacturing (46.5 actual v. 47.9 expected, 47.8 previous) and services (51.1 actual v. 50.3 expected, 50.4 previous) misses. A +1bp advance has the 10y @ 1.390%. 
  • Spanish Bonos hold modest gains. The 10y is lower by -2bps @ 2.375%. a record low
  • Italian BTPs are bid. The 10y is off -2bps @ 2.575%, and is flirting with all-time lows.

10-Yr: -02/32… EUR/USD: 1.3264… USD/JPY: 103.82…

07:17AM ET

USDJPY Approaches 104.00:
  • The Dollar Index trades flat near 82.25 as trade holds at its best level since September. 
  • EURUSD is +5 pips @ 1.3260 after the region's mixed Flash Manufacturing and Services PMI data. Eurozone manufacturing (50.8) slid to its lowest levels in a year and France's manufacturing (46.5) dipped to its lowest levels since May 2013. Services numbers fared a little better as the German reading (56.4) topped estimates and saw a slight downtick. The single currency is currently trying to find support at 11-month lows. 
  • GBPUSD is -5 pips @ 1.6590 as early selling has action testing the April lows. The recent spell of weak economic data continued today as retail sales (0.1% MoM actual v. 0.4% MoM expected) and public sector net borrowing (-GBP1.1 bln actual v. -GBP1.9 bln) both fell short of estimates. Resistance near 1.6700 is guarded by the 200 dma. 
  • USDCHF is -5 pips @ .9130 amid a rather uneventful trade. Action has held in a 30 pip range despite the larger than expected trade surplus (CHF3.98 bln actual v. CHF1.87 bln expected) as trade remains closely linked to the euro. 
  • USDJPY is +10 pips @ 103.80 as action contends with its best close since the end of January. An overnight bid tested the 104.00 level, but action has so far been unable to reclaim the mark. 
  • AUDUSD is -5 pips @ .9280, having recovered its early losses. The hard currency tumbled to session lows below .9240 following the weak Chinese HSBC Flash Manufacturing PMI (50.3 actual v. 51.5 expected, 51.7 previous), but buyers emerged at support and have managed to run trade back up to almost unchanged. USDCNY climbed to 6.1518. 
  • USDCAD is flat @ 1.0970 as trade flirts with its best close in four months. A lack of news and data out of Canada puts action at the mercy of the greenback.

10-Yr: -03/32… EUR/USD: 1.3260… USD/JPY: 103.81…

06:55AM ET

Treasuries Drift into the Cash Open:
  • Treasuries drift little changed into the cash open. 
  • Overnight action was limited to its usual 3bps.
  • Up front, the 2y is flat @ 0.472% and remains near its highest levels of August.
  • In the belly, the 5y is +0.6bps @ 1.636%. Traders will be watching the 1.640% area closely as resistance there is defended by both the 50 and 100 dma. 
  • The 10y is +1.1bps @ 2.437%. Near-term resistance lurks in the 2.450% area. 
  • A +0.9bp advance has the 30y @ 3.229% and contending with resistance in the 3.240% area.
  • A steeper curve has developed with the 2-10-yr spread trading 196.5bps
  • Precious metals are lower with gold -$12 @ $1283 and silver -$0.10 @ $19.40. 
  • Data: Initial and continuing claims (8:30), existing home sales, Philly Fed, and leading indicators (10).
  • Fed Speak: The Kansas City Fed's Jackson Hole Symposium begins.

10-Yr: -02/32… EUR/USD: 1.3263… USD/JPY: 103.78…

03:21PM ET

FOMC Minutes Cause Yields in the Belly to Climb:
  • Treasuries hovered little changed into afternoon trade before what is being described by some as 'hawkish' FOMC minutes pressed maturities to their worst levels of the day. 
  • The minutes from the July 29/30 policy meeting suggested, "Many participants noted that if convergence toward the Committee's objectives occurred more quickly than expected, it might become appropriate to begin removing monetary policy accommodation sooner than they currently anticipated."
  • Up front, the 2y climbed +3.5bps to 0.472%. The yield finished near its highest levels of August as action punched through resistance in the 0.450% area. 
  • Post-minutes selling had the biggest impact on the belly as the 5y rallied +5bps to 1.630%. The yield reclaimed the 200 dma, and is now testing resistance near 1.640% that is guarded by both the 50 and 100 dma. 
  • A +2.1bp advance ran the 10y up to 2.426%. Three days of selling has the benchmark yield at its highest level in more than a week, and approaching the important 2.450% region.
  • A flat session at the long end saw the 30y close @ 3.220%. Afternoon selling caused action to probe resistance in the 3.225% area, but so far action has been unable to breakout. 
  • Today's action caused some flattening along the curve as the 2-10-yr spread narrowed to 195.5bps and the 5-30-yr spread tightened to 159bps.
  • Precious metals went off near their lows as gold fell -$6 to $1291 and silver added +$0.03 to $19.45. 
  • Data: Initial and continuing claims (8:30), existing home sales, Philly Fed, and leading indicators (10).
  • Fed Speak: The Kansas City Fed's Jackson Hole Symposium begins.

10-Yr: -07/32… EUR/USD: 1.3263… USD/JPY: 103.70…

01:47PM ET

Dollar Hits 11-Month High:
  • The Dollar Index holds onto small gains near 82.05 as trade looks to put in its first close above 82.00 since September
  • Action has spent the entire U.S. session in a tight 10 cent range as traders await the FOMC minutes, which are due out at the top of the hour. 
  • EURUSD is -30 pips @ 1.3285 as trade presses to its lowest level in 11 months. The single currency has been under pressure since early-May as negative and slow growth environments plague much of the region and have some worried of a Japan-like stagnation. The 1.3200 support level will be monitored into Friday's Jackson Hole speech by ECB head Mario Draghi. Flash Manufacturing and Services PMI data from across the eurozone will be released tomorrow. 
  • GBPUSD is +5 pips @ 1.6620 after surrendering all of its early gains. Sterling surged to the 1.6680 level after the latest MPC votes indicated two members were in favor of a 25 bp rate hike at the August meeting; however, action was rejected at resistance and the 200 dma and has pushed lower over the course of the session. Britain's retail sales and public sector net borrowing are scheduled for tomorrow. 
  • USDCHF is +15 pips @ .9110 as action contends with its best close of 2014. A quiet day for news and data from Switzerland has left action at the mercy of the euro. Swiss data is limited to the trade balance. 
  • USDJPY is +45 pips @ 103.35 as trade rallies to its best level in more than four months. Fueling today's advance was the larger than trade balance miss, which marked the 40th consecutive month of a deficit. The 104.00 level will be key in the days ahead.
  • AUDUSD is +10 pips @ .9310 as trade recoups its early losses. The hard currency has seen a relatively uneventful trade despite overnight comments from RBA Governor Glenn Stevens indicating rates were likely to remain on hold for a while. Resistance in the .9340 area is guarded by the 100 dma. Australia's CB Leading Index is due out tonight. China's HSBC Final Manufacturing PMI will cross the wires this evening
  • USDCAD is +10 pips @ 1.0950 amid a mostly uneventful trade. A close above 1.0972 would mark the best since late-April.

10-Yr: -04/32… EUR/USD: 1.3290… USD/JPY: 103.36…

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