US TSYS: Late SOFR/Treasury Options Roundup

• KUWAIT ARMY SAYS ONE KUWAITI NAVY VESSEL TARGETED, FOUR ARMED FORCES PERSONNEL INJURED
• KUWAIT ARMY SAYS IRANIAN 'AGGRESSION' ON KUWAIT TARGETED SEVERAL VITAL AND CIVILIAN FACILITIES WITH DEBRIS FALLING IN NUMBER OF LOCATIONS CAUSING MATERIAL DAMAGE
• KUWAIT ARMY SAYS IT HAS DETECTED SINCE THIS EVENING TILL NOW ONE BALLISTIC MISSILE, FIVE CRUISE MISSILES AND 33 DRONES WHICH WERE INTERCEPTED

Re-escalations in US-Iran tensions since Macklem spoke at the start of July have illustrated just how important a nimble approach is, with oil prices rebounding 15% after having fallen back to pre-war levels, albeit they are still down 35% or so from peak.

• Indeed it’s far too early to declare anything close to mission accomplished on inflation: Macklem may comment that latest data show little evidence of higher energy prices bleeding into broader, persistent pressures, but that by the same token it’s too early to make any firm conclusions.
• We will be watching for whether the BOC implies upside risks have diminished given what appears to be a peak in oil prices, which would be a dovish development but one that looks less likely than it did a week earlier given the latest geopolitical events (oil prices up 10% Monday alone on the eve of the meeting). Even an edit to the “consecutive” hike scenario would be construed dovishly.
• We doubt there will be much new on the trade front, merely a reiteration of downside risks it presents to rates. The US-Canada-Mexico trade negotiations present the clearest risk of a rate cut per the BOC; even with the July 1 formal extension deadline having come and gone, with the US saying they will not agree to a full 16-year renewal, meaning the next and ongoing stage is rolling talks.
• But that’s in line with expectations and there is no indication yet that the US intends to trigger the release clause for the treaty, which would terminate the agreement in six months. Prediction markets imply only 10% (Kalshi) probability of the US leaving the trade pact before 2027. All that being said, it’s still another reason to stand pat on rates for now.

• RES 4: 164.08 Top of a bull channel drawn from Feb 12 low 
• RES 3: 163.62 2.000 proj of the Jan 27 - Feb 9 - Feb 12 price swing
• RES 2: 163.00 Round number resistance
• RES 1: 162.84 High Jul 1 and the bull trigger
• PRICE: 162.24 @ 19:53 BST Jul 15
• SUP 1: 161.28 Low Jul 10
• SUP 2: 160.59 50-day EMA
• SUP 3: 159.58 Low Jun 11
• SUP 4: 158.74 Low May 25  

A bull cycle in USDJPY remains intact and the pair is trading closer to its recent highs. The key short-term resistance and the bull trigger to watch is 162.84, the Jun 1 high. Clearance of this hurdle would confirm a resumption of the uptrend and open 164.08, the top of a bull channel drawn from the Feb 12 low. Note that moving average studies remain in a bull-mode position, highlighting a dominant uptrend. Key support is 160.59, the 50-day EMA.