EMERGING MARKETS: CEEMEA FX Price Signal Summary - EURPLN Gains Considered Corrective

• RES 4: 111-12+ High Sep 1 key resistance
• RES 3: 110-31+ 50-day EMA
• RES 2: 110-10+ High Sep 8
• RES 1: 110-00+ 20-day EMA
• PRICE: 109-10 @ 11:31 BST Sep 20
• SUP 1: 109-03 Low Sep 13 / 19 and the bear trigger
• SUP 2: 109-00 Round number support
• SUP 3: 108-20 1.000 proj of the Jul 18 - Aug 4 - Aug 10 price swing
• SUP 4: 107.23 1.236 proj of the Jul 18 - Aug 4 - Aug 10 price swing

Treasuries continue to trade closer to the recent lows. Last week’s low of 109-03 (Sep 13) reinforces the bearish theme. However, it is worth noting that the recovery from the Sep 13 low was a bullish development and a hammer candle - a reversal signal - was confirmed at that day's close. The pattern suggests scope for a correction. First resistance to watch is 110-00+, 20-day EMA. On the downside, a break of 109-03 would resume the downtrend.

The combination of yesterday’s twist steepening of the SOFR strip and preliminary OI data points to the following:

• Short cover in SFRU3, long cover in SFRZ3 & SFRH4.
• A mix of short setting and long cover in the reds, with the long cover being the dominant force on a pack basis.
• Long cover in the greens.
• Short setting providing the dominant force in the blues.

• Tsys have extended firmer momentum after initially limited impulse from notably softer than expected UK CPI (core 6.2% Y/Y vs cons 6.8), translating to 2Y yields back near levels prior to yesterday’s stronger CAD CPI.
• Cash Tsys trade 1-3bps richer, led by the front end to belly ahead of today’s FOMC decision.
• TYZ3 sits at session highs of 109-10, off yesterday’s late low of 109-03 which tested but didn’t breach the bear trigger at the same level from the Sep 13 low. It remains firmly in yesterday’s range albeit on relatively subdued volumes of 230k.
• Pertinent futures flow from London trade includes a 7k FV block buyer at 104-24.75 (DV01 $306k) and a 2.7k UXY block seller at 113-20+ (DV01 $245k).
• The FOMC decision is clearly in focus ahead. Our full preview can be found here: https://roar-assets-auto.rbl.ms/files/55779/FedPrevSep2023-ANALYSTS.pdf.
• Elsewhere on the docket, weekly MBA mortgage data at 0700ET plus $50B of 17-week bills at 1130ET.

• The FOMC will hold rates at its September meeting, while maintaining its tightening bias.
• Despite recent progress on inflation, which will see core PCE forecasts revised down for the first time since 2020, we expect most of the FOMC's median expectations to be largely unchanged in the latest set of quarterly projections.
• That includes the median rate "dots" indicating one further hike by end-2023, as most participants will remain cautious of signalling that the hiking cycle is over, and 100bp of cuts in 2024.
• Both of these are a very close call though, with risks that the 2023-24 dots shift a notch lower.
• The interplay between the inflation forecasts and implied 2024 cuts in the Fed funds rate projections will be a key market focus of the new projections and of the press conference.