FED: Current FOMC Voters Split On September Rate Cut (2/3)

• RES 4: 1.3920 High May 21  
• RES 3: 1.3862 High May 29 
• RES 2: 1.3798 High Jun 23  
• RES 1: 1.3746/74 50-day EMA / High Jul 17 
• PRICE: 1.3687 @ 17:15 BST Jul 21
• SUP 1: 1.3639/3557 Low Jul 08 / 03
• SUP 2: 1.3540 Low Jun 16 and the bear trigger
• SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
• SUP 4: 1.3473 Low Oct 2 2024

USDCAD traded lower Monday, fading off recent highs. Nonetheless, attention is on resistance at 1.3746, the 50-day EMA. It has been pierced. A clear break of it is required to highlight a possible stronger S/T reversal. This would open 1.3798, Jun 23 high. For now, a bear trend remains in place. A resumption of weakness would refocus attention on key support at 1.3540, the Jun 16 low. Clearance of this level would confirm a resumption of the downtrend.  

The cash Treasury curve bull flattened Monday.

• Multiple factors helped cash Treasuries extend their rally into a 4th day, though a survey of multiple desks suggested a specific catalyst couldn't really be identified, with no tier 1 data or FOMC speakers (pre-meeting blackout period) on the docket.
• A decline in oil prices helped bring breakevens lower, with reports of a potential Russia-Ukraine meeting applying downside pressure.
• Some cited reports of potential trade tension between the US and EU ahead of the White House-imposed Aug 1 deadline for a deal. This appeared to boost EGBs in early trade, and later Treasuries may have benefited from a flight to quality, though the broader move couldn't quite be squared with the pickup in equities and the Euro.
• Additionally the Japanese House Of Councillors Election had a roughly as-expected outcome, helping global core FI in a relief rally (though we will know more when Japanese bond markets return from holiday).
• In the end it may have been a case of fading /profit taking of last week's curve steepening. Short-end yields remained relatively anchored ahead of the FOMC next week, with no change firmly expected.
• Latest levels: the 2-Yr yield is down 2.1bps at 3.8481%, 5-Yr is down 4.2bps at 3.9044%, 10-Yr is down 4.8bps at 4.3678%, and 30-Yr is down 5.1bps at 4.9368%. Sep 10-Yr futures (TY) up 13/32  at 111-06 (L: 110-24 / H: 111-9.5)
• Tuesday's data is largely second-tier, with Redbook retail sales, and Philadelphia and Richmond Fed regional activity surveys. Fed Chair Powell and Gov Bowman speak Tuesday but not on monetary policy - they are part of a regulatory conference ("Integrated Review of the Capital Framework for Large Banks Conference").
• The scheduled highlights come later in the week, starting with Thursday's jobless claims and PMI data.

Monday's US rates/bond options flow included:

• FVQ5 108 puts sold at 2.5 in 2.5k
• FVU5 108.25 Puts vs 108-13 45% Seller 26.5s 2500x
• TYQ5 111.5/113.5/115.5 call fly sold at 6 in 1K
• TYU5 112.00 calls vs. 111-08 paper paid 0-28 in 20K
• TYU5 112.50 calls vs 111-03, 20%. paper paid 0-17 on 30K
• TYU5 110/112 strangle, paper paid 0-45 on ~18.6K
• TYU5 111/110 Put 1x2 paid 3s in 1.5k
• TUU5 103.25 Puts paid 3 in 2.5k
• TYU5 110/112 Strangle paid 45 in 19K
• SFRU5 95.9375/ 96.00/ 96.0625/ 96.125 call condor bought for 0.75 in 4K