STIR: Mar'26 SOFR Straddle Scale Seller Ahead FOMC

• RES 4: 1.1276 High Jul 18 ‘23 
• RES 3: 1.1214 High Sep 25 2024 and a key resistance 
• RES 2: 1.1188 0.764 proj of the Feb 28 - Mar 18 - 27 price swing  
• RES 1: 1.1144 High Oct 1 2024 / High Apr 3    
• PRICE: 1.0914 @ 16:44 BST Apr 7
• SUP 1: 1.0882 Intraday low     
• SUP 2: 1.0824 20-day EMA     
• SUP 3: 1.0733 Low Mar 27 and a key short-term support     
• SUP 4: 1.0684 50-day EMA and a short-term pivot level

EURUSD has pulled back from last week’s high. The trend condition remains bullish and a move lower is considered corrective. Recent gains resulted in the break of key resistance at 1.0955, the Mar 18 high, confirming a resumption of the uptrend. It paves the way for a climb towards 1.1188 next, a Fibonacci projection. MA studies are in a bull-mode position highlighting a dominant uptrend. Initial firm support lies at 1.0824, the 20-day EMA.

• Today’s huge reversal of Treasury gains seen with the Asia open sees 5Y and 10Y yields 10.5/15.3bp higher from Friday’s close, driven entirely by real yields (+16.5/+18.7bp).
• Breakevens meanwhile have slid further: the 5Y is set for its lowest close since Dec (currently 2.344%, -6.5bp) and the 10Y for its lowest close since Sep (2.16%, -3bp).
• Turning to inflation swaps for a cleaner cross-market comparison, the US 5Y5Y may only be 1bp lower on the day at 2.30% in our calculation but it’s still 9bp lower than pre-“Liberation Day” tariff announcements and at levels that were last sustained in Sep 2021.
• The EUR 5Y5Y meanwhile at 2.08% is +0.5bp on the day and only 3bp lower than pre-Apr 2 tariffs. It’s only back close to levels seen prior to Mar 4 EU and German fiscal announcements as they continue to provide some relative buffer and with hopes for some further fiscal support (for example Spain last week announced a E14bn package to support industries). 

• Couple of events expected Monday include:
  • Pres Trump press conference with Israel PM Netanyahu at scheduled at 1400ET.
  • Chicago Fed Pres Goolsbee will be interviewed on CNN OutFront tonight at 1900ET.
• US Data/Speaker Calendar (prior, estimate)
  • 08-Apr 0600 NFIB Small Business Optimism (100.7, 99.0)
  • 08-Apr 1130 US Tsy $70B 6W Bill auction
  • 08-Apr 1300 US Tsy $58B 3Y Note auction (91282CMW8)
  • 08-Apr 1400 SF Fed Daly economic outlook