Ultra-Bond Futures, USDCNY, and Dollar Index
China's retail sales and industrial production fell short of expectations in April. The People's Bank of China (PBOC) has increased long-term liquidity through the medium-term lending facility (MLF). The PBOC and the government will likely need to consider implementing monetary and fiscal stimulus to support the economy.
On a positive note, US industrial production exceeded expectations in April, rising 1.4% month-over-month. This is the largest increase since January 2021. The strong US industrial production data is likely due to the continued recovery in the US economy and the strong demand for US goods and services.
US Ultra Bond Futures
A clear break seems underway, and this would confirm it as a continuation pattern (as long as there are no event risks in the short term).
The break should hold at the first support level of 133'18 with a target of 126'02. This is expected to drive the 5-30 yield curve higher, breaking +45 bps and reaching new trend highs of 0.63. The ideal target is still +82 bps.
Additionally, the German 5-30 Yield Curve also looks promising.
A triangle breakout is underway, suggesting a high likelihood of reaching 7.04. If this hypothesis holds, we can expect the value to rise to 7.26.
The next resistance level is at 7.04. If the price breaks above this level, it will likely rise to 7.26. The next resistance level is at 7.29. If the price breaks above this level, it will likely continue to rise.
USDCNH's move would equate to an extension target of 7.29.
On Friday, the USD broke out of a September 2022 bull flag. However, two consecutive higher highs are still needed to confirm the breakout. The increase in yields should provide support, but to fully secure the long-term bull flag, we must close above 103.10 in an impulse wave. It is likely to reach that level, but how it breaks through is crucial. The bull flag indicates new trend highs and could significantly boost the hopes of dollar bulls. Personally, reaching 108.16 (quarterly pivot S2 resistance) would be sufficient.
This is being sent as a note as it gets too messy on Substack chat with more than 2-3 charts and topics.