CANADA: Jobs Preview: Unemployment Rate Seen Ticking Back Up In Aug (1/2)

• Treasuries look to finish mixed Tuesday, curves twisting flatter (2s10s -3.504 at 48.004) w/ 2s-10s down 2.5-4 following stagflationary July's ISM Services data and a weak 3Y auction that drew 3.669% high yield vs. 3.662% WI.
• The headline Services PMI reading fell by 0.7 points to 50.1 (51.5 expected, 50.8 prior), merely a 2-month low but suggesting that an expected pickup in momentum and sentiment is not materializing.
• Meanwhile, S&P Global final PMIs for July were stronger than first thought, with the services PMI further confirming a fresh high since December. The soon to be released ISM Services will provide a useful alternative indicator for services activity in July after undershooting by 2.1pts back in June.
• The USD Index remained rangebound Tuesday, however the inability of markets to press the USD lower still after Friday's NFP print may suggest the price is building a base. The JPY was the poorest performing currency against all others in G10, aiding EUR/JPY to recovery back toward Y171.
• Trump spoke on his possible Fed picks to replace Kugler following her resignation over the weekend. The President declared he had a shortlist of 4, which includes both Kevin Warsh and Kevin Hassett, and while the President said he may use this Fed pick as a precursor to selecting the next Fed chair, he remained vague about the timing of such an announcement.

• RES 4: 0.6700 76.4% retracement of the Sep 30 ‘24 - Apr 9 bear leg
• RES 3: 0.6688 High Nov 7 ‘24
• RES 2: 0.6677 0.764 proj of the Jun 23 - Jul 11 - 17 price swing  
• RES 1: 0.6530/6625 High Jul 29 / 24 and the bull trigger
• PRICE: 0.6465 @ 16:51 BST Aug 5
• SUP 1: 0.6419 Low Aug 1
• SUP 2: 0.6373 Low Jun 23 and a bear trigger 
• SUP 3: 0.6354 38.2% retracement of the Apr 9 - Jul 24 upleg  
• SUP 4: 0.6323 Low Apr 16

AUDUSD rallied well off the week’s lowest levels last week on broad USD weakness. Last week, the pair traded through both the 20- and 50-day EMAs. This undermined the recent bullish theme and signals the likely start of a corrective cycle. Note that support 0.6455 the Jul 17 low, has also been cleared. The breach strengthens a bearish threat and signals scope for an extension towards 0.6373, the Jun 23 low. Key resistance has been defined at 0.6625 the Jul 24 high. It also represents the bull trigger.       

SOFR & Treasury call options drove Tuesday volumes, particularly in SOFR via flys and condors centered on Dec'25 to Mar'26 expirys. Underlying futures mixed, curves flatter with 2s-10s weaker after TYU5 climbed to May 30 highs overnight (112-15.5). Projected rate cut pricing pulling back from late Monday (*) levels: Sep'25 at -22.6bp (-22.9bp), Oct'25 at -38.4bp (-39.6bp), Dec'25 at -57.7bp (-59.5bp), Jan'26 at -68.9bp (-71.1bp).

• SOFR Options:
  • Block, 6,500 SFRZ5 95.68 puts, 0.75 ref 96.245
  • +20,000 SFRZ5 96.25/96.37/96.50/96.62 put condors vs. 95.75/95.87/96.00/96.12 put condor, .25 net
  • -8,000 0QZ5 97.25/97.50 call spds, 5.62 ref 96.95
  • +20,000 0QH6 97.25/97.50 call spd w/
  • +20,000 0QH6 97.25/97.50/97.62 call flys AND
  • +20,000 0QH6 97.25/97.50/97.75 call flys, paying 13.5-13.75 total on package
  • -5,000 SFRU5 95.75/95.81/96.06/96.12 iron condors, 2.25 ref 95.94
  • +65,000 SFRZ5 96.25/96.37/96.50/96.62 call condors, 2.75 ref 96.26
  • +10,000 SFRU5 96.12/96.18 call spds .87
  • +10,000 SFRU5 96.18/96.25 call spds .62
  • -5,000 SFRU6 95.87 puts, 6.0
  • +1,500 SFRZ5 96.25 straddles, 33.5
  • 8,000 SFRU5 96.06/96.12/96.18 call flys ref 95.935
  • Block, 12,000 SFRU5 96.00/96.25 call spds 3.25 ref 95.95
  • over 8,000 SFRU5 96.00 calls, 5.0 last ref 95.935
  • 2,000 SFRU5 95.87/96.00 combos ref 95.935
  • 1,750 0QZ5 97.00/97.12 call spds ref 96.95
  • 9,300 SFRZ5 96.25/96.37/96.50/96.62 call condor ref 96.27 to -.265
  • 1,700 SFRU5 95.75/95.87 put spds, ref 95.935
  • 2,000 SFRU5 95.75/95.81/95.87/95.93 put condors ref 95.945
• Treasury Options:
  • +18,500 wk5 TY 113.25 calls, 20 ref 112-07/0.25%
  • -3,000 TYU5 112.25 straddles, 108 appr implied vol 5.76%
  • +3,000 TYQ5 113 calls, 19
  • 1,000 TYV5 104.5/107.5 3x1 put spds ref 112-08.5
  • 7,900 wk2 TY 112 puts, 9 last ref 112-10.5 (exp 08/08)
  • over 4,200 TYU5 113.5 calls, 13 last
  • 2,500 TYU5 112/113 call spds, 28 ref 112-14