US: MNI POLITICAL RISK - Indirect US-Iran Talks Underway In Geneva

• RES 4: 1.2052 3.000 proj of the Nov 5 - 13 - 21 price swing
• RES 3: 1.2006 High Jun 17 2021 
• RES 2: 1.1958 2.500 proj of the Nov 5 - 13 - 21 price swing
• RES 1: 1.1931 Intraday high
• PRICE: 1.1916 @ 12:42 GMT Jan 27
• SUP 1: 1.1808 High Dec 24
• SUP 2: 1.1768 High Jan 20 
• SUP 3: 1.1716 20-day EMA
• SUP 4: 1.1670 Low Jan 22  

A strong bull cycle in EURUSD remains in play and last Friday’s rally plus this week’s follow through, strengthens current bullish conditions. The pair has cleared 1.1919, the Sep 17 high and a key medium-term hurdle for bulls. This paves the way for an extension toward 1.1958, a Fibonacci projection. Note that the trend is overbought, a pullback would allow this condition to unwind. Support to watch is 1.1716, the 20-day EMA.

SOFR & Treasury option volumes muted ahead of Wednesday's FOMC policy annc. Underlying futures mildly lower, inside narrow overnight range, curves mildly steeper (2s10s +.475 at 62.398). Projected rate cut pricing largely steady vs. late Monday levels (*): Jan'26 at -0.7bp, Mar'26 at -3.9bo (-4.2bp), Apr'26 at -7.2bp (-7.7bp), Jun'26 at -19.5bp (-19.2bp), first full cut priced in at Jul'26, steady at -26.7bp.

• SOFR Options:
  • 5,000 0QH6 96.87/97.00/97.06 broken call flys, 1.5 ref 96.735
  • 4,750 SFRU6 96.18/96.31/96.43 put trees, 2.75
  • 1,000 SFRZ6 100 calls ref 96.75
  • -1,500 SFRZ6 96.25/96.87/97.25 broken put flys, 3.5
  • +2,950 SFRH6 96.50/96.56 call spds, 0.5 vs 96.345/0.06%
  • 1,100 SFRM6 96.43/96.56/96.62/96.81 broken call condors
• Treasury Options:
  • over 9,500 TYH6 113 calls, 6, part tied to 112.5/113 1x2 call spd
  • over 6,000 TYJ6 110 puts, 14 last
  • +1,500 FVJ6 109.75 calls, 9.5
  • +1,300 FVJ6 109.5/110 call spds, 5
  • -2,500 TYH6 110/112 2x1 put spds, 29 ref 111-26
  • +2,500 wk5 TY 111.25/111.5 2x1 put spds, 1 ref 111-24 (exp 1/30)

• Continued dollar weakness playing out across the NY crossover, with the solid equity/commodity backdrop continuing to provide a supportive backdrop for the Australian dollar, with AUDUSD now retesting yesterday’s peak print and a key resistance point at 0.6942.
• Further strength today looks set to extend a winning streak to seven sessions, and above here, targets include 0.6991 and 0.7022, projections of Nov 21 - Dec 10 - 18 price swing. It is worth flagging the trend is overbought and any pullback would allow this condition to unwind.
• As a reminder, a considerably better-than-expected December employment report in Australia triggered renewed RBA tightening bets last week, providing an additional AUD tailwind which has already been benefitting from the rallying Chinese yuan and constructive back drop for higher beta FX.
• Next up for Australia, all focus will turn to the crucial Q4 underlying CPI update which is due tomorrow and comes just one week ahead of the RBA’s Feb 3 policy decision. The outlook for Australia’s December 2025 quarterly Consumer Price Index is one of persistent, higher-than-expected inflationary pressure, with significant risks that it will stay above the Reserve Bank of Australia’s 2–3% target range.
• The removal of state and federal government electricity subsidies at the end of 2025 is expected to cause a sharp, albeit partly technical, jump in headline inflation, expected to show up in the upcoming release.