US TSYS: Late SOFR/Treasury Option Roundup

The below is taken from the MNI US Payrolls Preview and recaps what have been some sizeable impacts on payrolls and unemployment from the government. 

• Workers furloughed by the federal government shutdown (Oct 1-Nov 12): Scope for some upside to household survey employment if those furloughed incorrectly identified themselves as unemployed in November. It’s hard to say to what extent the 171k increase in temporary layoffs in November was down to government employees viewing themselves as unemployed or a more genuine indirect impact from contractors and other government-dependent industries opting for temporary layoffs.
• JPMorgan on the matter: “Despite the government shutdown ending partway through the household survey reference week, a number of federal employees still classified themselves as being on temporary layoff. Reversing that in December could cut the unemployment rate about 4bp.”
• Furlough shouldn’t have had any direct impact on payrolls figures, with only the indirect impact captured. Jefferies take a different view though, arguing that if it took government employees a few days to return to work post-shutdown then this would have been reflected as an increase in December payrolls.
• DOGE deferred resignations: potentially small negative impact in both sides of December report. Largest hit back in October after most workers who accepted a buyout remained on government payrolls through Sep 30. However, workers who were eligible for regular retirement could also accept a buyout until their planned retirement date, which could see another modest drag in December. As such, this will only have had an impact if it persuaded those to actually take retirement rather than continue working. The impact will have been captured in both payrolls and the household survey unemployment details but the latter is particularly noisy and will be hard to ascertain whether it was a driver or not in this latest monthly report.

• RES 4: 186.41 2.618 proj of the Jul 31 - Sep 29 - Oct 2 price swing
• RES 3: 186.31 Bull channel top drawn from the Feb 28 low
• RES 2: 185.77 2.5000 proj of the Jul 31 - Sep 29 - Oct 2 price swing
• RES 1: 184.92 High Dec 22
• PRICE: 183.09 @ 15:29 GMT Jan 7
• SUP 1: 182.25 Low Dec 19
• SUP 2: 181.57 Low Dec 17 
• SUP 3: 181.25 50-day EMA
• SUP 4: 180.10 Low Dec 5 

The trend structure in EURJPY remains bullish despite this week’s fade off highs. The current flat correction appears to be a flag formation - a bullish continuation pattern. Sights are on 186.31, the top of a bull channel drawn from the Feb 28 low. This level also represents a key resistance point. Note that support at 183.17, the 20-day EMA, has been pierced. A clear breach of it would signal the start of a stronger corrective cycle.   

• Precious metals have pulled back on Wednesday, with gold falling by 0.8% to $4,457/oz and silver down by 3.5% at $78.4/oz. At the same time, platinum has also fallen by ~6%, while palladium is down by almost 4%.
• Despite the move, prices remain notably higher compared with levels a week ago, and bullish technical conditions remain in place, aided by geopolitical tensions stemming from US/Venezuela developments.
• For gold, initial resistance and the bull trigger is the Dec 26 all-time high of $4,550. A break of this level would open $4,578.3, a Fibonacci projection.
• First support at $4,361.7, the 20-day EMA, which has been pierced.
• Similarly, the trend set-up for silver remains bullish, with the bull trigger at $84.008, the Dec 29 high. Clearance of this level would confirm a resumption of the uptrend.
• The first important support to watch lies at $70.674, the 20-day EMA.
• Elsewhere, WTI crude is lower today after President Trump announced that Venezuela will ship up to 50m bbl of oil to the US. In addition, CNBC reported that such flows will continue in return for reduced sanctions on Venezuela.
• WTI Feb 26 is down by 1.6% at $56.2/bbl.
• From a technical perspective, a bearish theme for WTI futures remains in place, with initial support at $54.89, the Dec 16 low. Below here, a resumption of the bear leg would signal scope for a move towards $53.77, a Fibonacci projection.