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Ebbs Lower into Friday Close

By Vicki Schmelzer
     NEW YORK (MNI) - With monetary policy decisions by the Federal Reserve and
other major central banks now in the rear-view mirror, the focus shifts now to
economic data, which will drive future policy. 
     Upcoming U.S. data sets are expected to be tainted by hurricane effects and
it may be months before these readings can be deemed clean, analysts said. 
     Nevertheless, the market is keen to see next week's releases, which include
August durable goods, personal income and spending, advanced goods trade, and
the third estimate of Q2 GDP.
     U.S. Treasury yields held a firm tone Thursday, but remained down from the
high yields seen after the Fed decision, while eurozone and UK yields played
catch-up to U.S. yields. 
     Ten-year U.S. Treasury yields were last near 2.276%, after trading in a
2.246% to 2.282% range. Wednesday's yield high of 2.287% was the highest since
August 8, when yields peaked near 2.289%. Ten-year yields last closed above
2.30% on July 27. 
     The Sept. 8 yield low near 2.016% was the lowest since Nov. 10, when yields
saw a wide range of 1.991% to 2.145% two-days after the U.S. election. 
     After a larger yield sell-off in June, U.S. yields subsequently recovered,
and 10-year yields rose to 2.396% July 7, the highest since mid-May. 
     As background, U.S. Treasury yields posted highs near 2.421% on May 11,
which was the highest yield since March 31, when the 10-year yield peaked at
2.431%. 
     On March 14, ahead of the Fed decision, 10-year U.S. yields topped out at
2.628%.
     As a reminder, 10-year U.S. yields rallied from lows near 1.720% Nov. 9,
the day after the U.S. election, to highs near 2.639% on Dec. 15, 2016, which
was the highest since the Sept. 19, 2014, peak near 2.655%.
     Ten-year German Bund yields closed near 0.455% Thursday, after trading in a
0.447% to 0.484% range. The earlier high was the highest since August 7, when
Bund yields peaked near 0.491%. 
     The low of 0.292%, seen Sept. 8, was the lowest Bund yield since June 27,
when yields troughed at 0.238%. The June 14 low of 0.225% was the lowest since
April 20, when yields bottomed at 0.192%.
     The July 12 yield high of 0.619% was the highest since Jan. 4, 2016, when
Bund yields peaked at 0.627%, the 2016 high. The next level of resistance would
be 0.651%, the Dec. 30, 2015 high. 
     As background, Bund yields fell to a low near -0.161% Sept. 27, 2016,
versus the life-time low around -0.2059% seen July 6, 2016.
     Ten-year Japanese government bond yields closed around 0.040%. When U.S.
and other global yields were at recent lows earlier in September, JGB yields
flirted with negative territory and tested the lowest yields since mid November.
     JGB yields hit highs near 0.108% July 7, which prompted the Bank of Japan
to step in buying bonds, offering to buy 10-year JGBs in unlimited amounts at
0.11%. 
     Current low JGB yields compared to the Feb. 3 highs near 0.150%, which were
the highest since the BOJ introduced negative interest rate policy back on Jan.
29, 2016. 
     Ten-year UK Gilt yields closed around 1.367%, after trading in a 1.362% to
1.392% range.  
     The Sept. 8 low of 0.951% was the lowest since June 15, when yields tested
lows near 0.938% and the earlier high was the highest since Feb. 3, when UK
yields hit 1.420%.
     The June 14 low of 0.923% was the lowest since Oct. 7, when Gilt yields
bottomed near 0.905%.
     On Jan. 26, 2017, 10-year UK yields saw highs near 1.530%, which was the
highest yield since Dec. 15, when yields hit 1.536%, the highest since May 5,
2016, when Gilt yields saw a high near 1.538%.
     In currencies, the euro held near $1.1940 late Thursday, in the middle of a
$1.1866 to $1.1954 range. 
     The pair bottomed Sept. 14 near $1.1838, and stalled ahead of the August 31
lows near $1.1823, seen as initial support. 
     Only last month, on August 17, the euro bottomed near $1.1662, the lowest
level since July 27, when the pair bottomed near $1.1650. As the dollar slipped
and ECB expectations changed, the euro recovered. 
     The Sept. 8 high of $1.2092, seen at the peak of dollar selling, was the
highest euro level since Jan. 2, 2015, when the pair topped out at $1.2108. The
2015 high was $1.2109, seen Jan. 1. 
     In other pairs, dollar-yen held near Y112.53, in the middle of a Y112.14 to
Y112.72 range. The earlier high was the highest since July 17, when the pair
peaked near Y112.87, which will be the next topside hurdle. 
     Market players were watching to see if dollar-yen will maintain its toehold
above the 200-day moving average, currently at Y112.20. A sustained break higher
will target the July 11 highs near Y114.49. 
     Cable was closing around $1.3583, on the high side of a $1.3471 to $1.3587
range. 
     Wednesday's high near 1.3657 was the highest since early June 24, the day
after Brexit, when the pair traded in a wide $1.3229 to $1.5018 range. 
     In commodities, spot gold held near $1,291.05 per ounce, after trading in a
$1,288.20 to $1,301.75 range. The last time gold closed below $1,300 was August
25 and a decisive break of $1,290 will target that day's lows near $1,276.36. 
     The 55-day moving average comes in ahead of that around $1,282. 
     The $1,357.61 gold high, seen Sept. 8 at the peak of U.S. dollar sales and
risk aversion, was the highest since August 16, 2016, when the precious metal
peaked at $1,358.21. 
     NYMEX November (new front month) light sweet crude oil futures settled down
$0.14 at $50.55 per barrel, after trading in a $50.07 to $50.81 range. 
     The 200-day moving average, currently at $49.56, will act as initial
support, if the psychological $50 mark gives way. 
     As background, West Texas Intermediate posted a high of $52.00 May 25,
before the announcement of a nine-month extension of the OPEC/non-OPEC
production cuts, and that will be the next larger topside target. 
     This extension was largely priced in and oil fell to $42.05 on June 21.
Rumors continue to swirl that OPEC may extend the current agreement, set to
expire in March 2018, until the end of next year. 
     In U.S. stocks, the S&P 500 closed down 0.30% at 2,500.60, after trading in
a 2,499.00 to 2,507.16 range. The index posted a record intraday high of
2,508.85 Wednesday and closed at a record high of 2,508.24.
     At Thursday's close, the S&P 500 was up 11.7% year-to-date. 
     Market players were also monitoring the Russell 2000 index, which often
leads larger stock swings.
     The Russell 2000 closed around 1,444. The earlier high of 1,448.844 was the
highest level since late July, but still below the 1,452.091 life-time high
posted July 25. 
     Last month, the index bottomed at 1,349.354 on August 18, the lowest level
since April 17, when the Russell 2000 bottomed at 1,345.363.
     On risk appetite, the CBOE's volatility index or VIX was last at 9.67, on
the low side of a 9.54 to 10.21 range. The index remained well below its 200-day
moving average, at 11.48, which has been falling lately. 
     The VIX high of 17.28, seen August 11, was the highest since Nov. 9, the
day after the U.S. election, when the VIX peaked at 21.48. The high for this
month has been 14.06, seen Sept. 5. 
     The July 26 low of 8.84 was a new life-time intraday VIX low (prior
life-time intraday low was 8.89, seen Dec. 27, 1993). 
     There is a host of Fed speakers Friday. For details, see the U.S. News
Events Calendar on MNI Main Wire at 7:18 a.m. ET. 
     --follow MNIEyeonFX on twitter.com --
--MNI New York Bureau; tel: +1 212-669-6438; email: vicki.schmelzer@marketnews.com
[TOPICS: MNUEQ$,M$U$$$,MI$$$$,M$$FI$,MN$FI$,MN$FX$]