US TSYS: Late SOFR/Treasury Option Roundup
Option desks reported continued upside call trade in SOFR options Tuesday while Treasury option trade was more mixed after a pick-up in 5- and 10Y puts overnight. Curves flattened (2Y10Y -3.971 at -70.663) as short end futures held weaker levels in late trade. As such, rate hike projections through year end inched higher: Sep 20 FOMC is 16% w/ implied rate change of +4bp to 5.369%. November cumulative of +11.6bp at 5.445, December cumulative of 10.8bp at 5.437%. Fed terminal at 5.44% in Nov'23.
- SOFR Options:
- Block, 8,000 SFRU4 99.00/100.0 call spds 2.5 ref 95.355
- 2,100 SFRH4 96.00/97.00/98.00 call flys ref 94.73
- Block, total 12,000 0QZ3 97.25 calls, 4.0 vs. 95.70 to -.695/0.08%
- Block, 2,500 SFRV3 94.56/94.62/94.68/94.81 call condors, 1.5 ref 94.575
- 2,000 0QU4 97.00/97.50 call spds ref 96.115
- 2,500 SFRZ3 94.68/95.00 call spds ref 95.575
- 5,000 SFRZ3 94.68 calls ref 94.575
- 5,100 SFRZ3 94.56 calls ref 94.575
- Treasury Options:
- 6,000 TYV3 116 calls, 2 ref 109-18.5
- 5,000 TYZ3 106/106.5 put spds, 4 ref 109-16.5
- 4,000 USV3 110/114 put spds, 29 ref 118-12
- 2,250 TYX3 110/113 1x2 call spds ref 109-15.5 to -16
- 2,400 FVZ3 107.5 calls, 37.5 ref 106-00.5
- 2,000 FVZ3 106 straddles, 219.5 ref 106-00
- 5,250 TYU3 109.5 calls, 17 last
- 5,000 TYU3 109/110 put spds ref 109-06
- 5,500 FVV3 107.5/108.5 call spds
- 2,000 FVV3 104.75/105.25/106.5 2x3x1 broken put flys ref 106-03.75
- 2,000 FVV3 104.5/105/106 2x3x1 broken put flys ref 106-03.75
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USDCAD TECHS: Sell-On-Rallies Remains Dominant Theme
- RES 4: 1.3387 High Jul 7 and a key resistance
- RES 3: 1.3333 50-dma
- RES 2: 1.3304 High Jul 10
- RES 1: 1.3223 20-day EMA
- PRICE: 1.3217 @ 16:14 BST Jul 21
- SUP 1: 1.3084 1.618 proj of the Apr 28 - May 8 - May 26 price swing
- SUP 2: 1.3032 1.764 proj of the Apr 28 - May 8 - May 26 price swing
- SUP 3: 1.2992 50.0% retracement of the 2021 - 2022 bull leg
- SUP 4: 1.2949 2.00 proj of the Apr 28 - May 8 - May 26 price swing
Rallies in USDCAD have been firmly sold for the duration of the week, however the pair trades modestly stronger into the Friday close. Nonetheless the onus remains lower for now. Early weakness Thursday keeps the medium-term trend pointed lower, and has resulted in a break of 1.3117, the Jun 27 low. This confirms a resumption of the downtrend that started on Oct 13 2022. The break lower opens 1.3084, and 1.3032, Fibonacci projection points.
US: Macro Developments Since Jun FOMC: Growth - resilient GDP
- Price and labor pressures may have softened in the latest month, but GDP growth has been coming in comfortably stronger than expected. It started with the third release for Q1 GDP growth surprisingly being revised from 1.3% to 2.0% contrary to just the 1.4% expected.
- Private consumption played a healthy role in this upward revision, shifting from the previously thought 3.8% to 4.2% for a fresh high since 1H21, along with exports.
- This relative consumer strength has continued, as even though overall retail sales disappointed for June, the control group that more directly feeds into national accounts came in twice as strong as expected at 0.6% M/M in June along with an upward revision.
- Along with a slew of other releases, it has left the Atlanta Fed’s GDPNow tracking at 2.4% for Q2 growth after steady upward revisions, stronger than the 1.8% tentatively estimated by analysts in the Bloomberg survey for the Jul 27 Q2 advance release.
- There is however one important caveat to the national accounts data and it’s that whilst GDP has been solid, an alternate approach in real gross domestic income (GDI) still fell -1.8% in Q1 despite upward revisions. The upshot is that average GDP and GDI growth in Q1 was just 0.1% annualized in a puzzling soft patch considering the strength in the expenditure accounts.
AUDUSD TECHS: Sold on Rallies
- RES 4: 0.7029 High Feb 14
- RES 3: 0.6993 76.4% retracement of the Feb 2 - May 31 bear leg
- RES 2: 0.6936 High Feb 16
- RES 1: 0.6900 High Jun 16 and key resistance
- PRICE: 0.6733 @ 16:12 BST Jul 21
- SUP 1: 0.6723 Low Jul 21
- SUP 2: 0.6719 50-day EMA
- SUP 3: 0.6651 Low Jul 11
- SUP 4: 0.6596 Low Jun 29 and key support
AUDUSD initially traded favourably through the Thursday European open on a solid local jobs report. This impact soon faded, however, keeping prices from any major test on the first upside resistance level at 0.6900, the Jun 16 high. A break of this level would open 0.6936, the Feb 16 high. Initial support lies at 0.6719, the 50-day EMA. Weakness through here would open potential for losses toward the 0.6718 200-dma.
