US TSYS: Late SOFR/Treasury Option Roundup: Sticking With Puts

• RES 4: 171.09 High Jul 23 ‘24 
• RES 3: 170.47 76.4% Fibonacci retracement for Jul - Aug ‘24 downleg  
• RES 2: 169.91 1.236 proj of the Feb 28 - Mar 18 - Apr 7 price swing
• RES 1: 169.71 High Jun 23
• PRICE: 169.30 @ 16:30 BST Jun 25 
• SUP 1: 167.46 Low Jun 23 
• SUP 2: 166.12 20-day EMA 
• SUP 3: 164.95 Low Jun 13   
• SUP 4: 164.40 50-day EMA   

The trend set-up in EURJPY is unchanged, it remains bullish and Monday’s strong start to this week’s session, reinforces a bullish theme. The cross has recently cleared 166.69, the Oct 31 ‘24 high. Scope is seen for a climb towards 170.47, a key Fibonacci retracement point. Note that the cross is overbought, a pullback would unwind this condition. Support to watch lies at 166.12, the 20-day EMA.      

• Friday’s May PCE report will offer a more timely look at consumer momentum, albeit with realized inflation not yet likely to have seen the largest impacts from US tariffs.
• Real personal spending is seen at 0.0% M/M in May after 0.1% in April although those more subdued readings follow a strong 0.7% in March. Thursday’s Q1 revisions are unlikely to materially alter expectations but should nevertheless be kept in mind.
• May’s retail sales report saw the biggest headline monthly drop since Mar 2023 (-0.9% M/M after -0.1%) whilst control group sales bucked the trend with 0.4% M/M after -0.1%. Vehicle sales played a big role here, sliding -3.9% M/M whilst gasoline sales fell -2.0% M/M.
• Looking ahead, the weekly Johnson Redbook retail sales index for the week ending Jun 21 points to a further slowdown in goods consumption.
• Consumer sentiment was mixed in May, with the U.Mich survey hovering at 52.5 for a second month (before rising to 60.5 in June) for its lowest since mid-2022 although the Conference Board's composite increased to 98.4 after a weak 85.7 in April (before giving some it back in June with 93.0). There is however a weak relationship between sentiment and actual consumption.
• Nominal personal income growth will also be watched after a strong run has offered a sizeable tailwind to spending in recent months. Income is expected to have increased 0.3% M/M in May after three months averaging 0.8% M/M, which has mostly translated into real disposable terms at an average 0.6% M/M.
• On the inflation side, Bloomberg consensus sees core PCE at 0.1% M/M in May but it’s likely a very close call with rounding to 0.2%. We have seen unrounded analyst estimates average 0.15% M/M in May, following 0.12% M/M in April and 0.09% M/M in March.
• Assuming no revisions, that would see core PCE inflation inch up from 2.52% to 2.59% Y/Y, with a soft1.4% annualized over the latest three months but a more robust 2.8% annualized over six months.
• Within this, we’ll watch market-based core services, which stood at 3.2% Y/Y in April although with some accelerating nearer-term trends with 3.7% annualized over three months and 3.4% over six months. 

• Stocks continue to scale off early Wednesday highs, the tech-heavy Nasdaq still outperforming in late trade. Currently, the DJIA trades down 167.8 points (-0.39%) at 42921.04, S&P E-Minis down 7 points (-0.11%) at 6139.25, Nasdaq up 22.6 points (0.1%) at 19935.0.
• Information Technology and Communication Services sectors continued to outperform in the second half, semiconductor makers supporting the tech sector: Super Micro Computer +7.89%, NVIDIA +3.96% and Advanced Micro Devices +3.24%.
• Interactive media and entertainment shares supported the Communication Services sector: Alphabet +2.18%, News Corp +0.65% and Fox +0.55%.
• Meanwhile, Consumer Discretionary and Consumer Staples sectors underperformed late, auto-makers and travel stocks weighing on the former: Tesla -5.10%, Caesars Entertainment -4.05%, Norwegian Cruise Line Holdings -2.42% CarMax -2.30% and Ford Motor -2.28%.
• Lagging Consumer Staples shares included: General Mills -4.77%, Conagra Brands -4.24%, Hershey Co -2.59%.