US TSYS: Early SOFR/Treasury Option Roundup
Modest option volumes noted overnight, carry-over downside put spreads, flys in SOFR options with underlying futures trading weaker. Treasury options seeing slightly better call trade in 5s and 30s w/Tsy futures climbing off late overnight lows. Tsys gapped lower Sunday evening after OPEC+ announced over 1M bbl/day production cut, surprising markets and underscoring inflation concerns.
- SOFR Options:
- 3,900 SFRM3 94.37/94.68/94.87 put flys, ref 95.09
- 3,000 OQJ3 95.87/96.00/96.25 broken put flys, ref 96.385 to -.37
- Block, 4,400 SFRM3 94.43/94.56 put spds, .75 ref 95.07
- Treasury Options:
- 1,000 FVK3 112/114/115 call flys vs. FVM 112/113/113.5 call flys
- over 5,200 FVM3 110.75 calls, 36-37 ref 109-10 to -10.25
- 2,000 TYK3 110.5/111/112 broken put flys ref 114-24
- 2,000 USK3 138/140 call spds, 6 ref 130-27
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USDCAD TECHS: Strong Friday Close
- RES 4: 1.3808 High Nov 34
- RES 3: 1.3795 2.0% 10-dma envelope
- RES 2: 1.3705 Dec 16 and the bull trigger
- RES 1: 1.3665 High Feb 24
- PRICE: 1.3508 @ 16:29 GMT Mar 3
- SUP 1: 1.3515 Low Feb 22
- SUP 2: 1.3476 50-day EMA
- SUP 3: 1.3400 Round number support
- SUP 4: 1.3358 Low Feb 16
USDCAD bulls remain in the driver’s seat for now and short-term pullbacks are considered corrective, Sights are on the key near-term resistance at 1.3705, Dec 16 high. A clear break of this hurdle would strengthen bullish conditions and clear the way for a test of the 1.3800 handle. The support to watch lies at the 50-day EMA. It intersects at 1.3476 and a clear break would be seen as a short-term bearish development.
US TSYS: Market Roundup: Bonds March Steadily Higher
Tsys finish near late session highs, yield curves bull flattening - completely reversing the prior session move: 2s10s -6.376 at -89.840. Bonds lead the rally early, similar drift in EGBs with no new inflation metric surprises overnight.
- Tsys pared gains briefly after higher than expected ISM Services composite of 55.1 (54.5 est), components: Business: 56.3; Prices Paid: 65.6 (-2.2); New Orders: 62.6 (+2.2); Employment 54.0 (+4.0).
- Tsys quickly rebounded with Bonds to early Wednesday levels (pre-ISM prices paid driven sell-off). Short end, however, lagged the move: Fed funds implied hike steady for Mar'23 at 31.2bp, but gained in May'23 cumulative 59.4bp (+2.0) to 5.170%, Jun'23 77.0bp (+2.1) to 5.345%. Fed terminal climbed to 5.480% high in Oct'23, but receded to 5.450% at the close.
- Salient events later in the week:
- Fed Chair Powell semi-annual mon-pol report to Congress, Tue 1000ET
- Fed Chair Powell report to Congress: House Fncl Srvcs, Wed 1000ET
- ADP employment data for Feb (106k prior, 200k est), Wed 0815ET
- NFP employment data for Feb (517k prior, 200k est), Fri 0830ET
AUDUSD TECHS: Bear Flag Formation
- RES 4: 0.6989 High Feb 15
- RES 3: 0.6921 High Feb 20
- RES 2: 0.6857 Former trendline support drawn from Oct 13 2022 low
- RES 1: 0.6784 High Mar 1
- PRICE: 0.6750 @ 16:28 GMT Mar 3
- SUP 1: 0.6695 Low Mar 01
- SUP 2: 0.6664 50% retracement Oct - Feb bull cycle
- SUP 3: 0.6629 Low Dec 20 and a key support
- SUP 4: 0.6585 Low Nov 21
AUDUSD’s February downtrend remains intact with price trading closer to its recent lows. The recent consolidation appears to be a bear flag - reinforcing the downtrend. The recent breach of both the 200-dma and 100-dma, reinforced bearish conditions and note too that the pair has cleared a trendline support drawn from the Oct 13 2022 low. The focus is on 0.6629, the Dec 20 low and the next key support. Resistance to watch is at 0.6857.
