US: FED Reverse Repo Operation

Tsys trading higher, scaling back highs after strong $35B 10Y Tsy note auction stopped 2.9bp through w/ 3.613% high yield (3.642%WI going into the auction cutoff). Yield curves bending flatter, but still off Mon's 40 year inverted lows (2s10s currently -2.056 at -81.562 vs. -84.734 late Monday).

• Tsys and EGBs traded weaker in the first half amid ongoing central bank telegraphing further (and larger if necessary) rate hikes needed to tamp down inflation.
• NY Fed Pres Williams economic outlook at WSJ live event cited a "lot of uncertainty around inflation" specifically services sector prices that may necessitate more hikes, adding "peak rate of 5-5.25% .. still a reasonable view."
• Earlier ECB commentary highlighted by MNI's event with Klaas Knot who said a 50bp hike was possible in May (as well as March) pending inflation developments. Kazaks called for "significantly" restrictive rates while de Guindos wouldn't rule out further hikes past March.
• Fed funds implied hike for Mar'23 at 26.1bp (+.7), May'23 cumulative 44.9bp to 5.031%, Jun'23 56.2bp (+1.9) to 5.144%, terminal at 5.16% in Aug'23.

• RES 4: 1.2506 1.382 proj of the Sep 26 - Oct 5 - Oct 12 price swing
• RES 3: 1.2401/2448 High Feb 2 / High Jan 23 and the bull trigger
• RES 2: 1.2265 High Feb 3
• RES 1: 1.2134 50-day EMA
• PRICE: 1.2074 @ 16:44 GMT Feb 8
• SUP 1: 1.1951 200-dma
• SUP 2: 1.1891 3.0% 10-dma envelope
• SUP 3: 1.1842 Low Jan 6 and a reversal trigger
• SUP 4: 1.1800 Round number support

GBPUSD Tuesday traded through 1.2000. The move lower reinforces the current short-term bearish theme and signals scope for a continuation. Sights are on the 200-dma next at 1.1952. A move through this level would expose key support at 1.1842, the Jan 6 low. A breach of the latter would highlight a potential trend reversal and a possible double top. Firm resistance is 1.2265, Friday’s high. Key resistance is 1.2448, Jan 23 high.