USDJPY TECHS: Monitoring Support

Analysts’ expectations of the terminal overnight rate range from 1.50-2.75%, with a median of 2.00%.

• Looking first at major Canadian banks - see table below - there is an even 3-3 split on whether the BoC cuts or holds Wednesday.
• Consensus is largely focused on a 2.00-2.25% terminal rate.

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• In what is seen as a very close call, the Bank of Canada is expected to maintain the overnight rate target steady at 2.75% on Wednesday.
• A pause would come after 225bp of cuts to the middle of the BoC’s currently estimated neutral range of 2.25-3.25%, leaving policymakers in a position to see further developments in the US-Canada trade dispute and the relevant data impact before pulling the trigger on further moves.
• A steady approach would befit BOC Governor Macklem’s comments in March that reiterated the importance of maintaining price stability, with monetary policy becoming less forward-looking and more nimble as officials attempt to navigate the uncertainty of the ongoing trade dispute with the US.
• The latest Monetary Policy Report could show upped expectations of inflation with lower growth forecasts vs the last edition in January, with the overall communications maintaining a tone of uncertainty.
• Reflecting the uncertainty, analysts’ expectations of the terminal overnight rate range from 1.50-2.75%.

Two-way SOFR & Treasury call spd interest and put structure selling since the open. Lowest volumes since prior to the Liberation day tariff announcement. Underlying futures firmer off second half highs, short end lagging; projected rate hike pricing mixed vs. this morning's levels (*) as follows: May'25 at -4.4bp (-5bp), Jun'25 at -20.7bp (-20.2bp), Jul'25 at -38.4bp (-38.4bp), Sep'25 -56.9bp (-56.7bp).

• SOFR Options:
  • -5,000 0QU5 96.62 puts, 29.0 vs 96.74/0.42%
  • -5,000 3QU5 95.00 puts, 4.0 vs. 96.31/.06%
  • +5,000 0QM5 95.25/3QM 95.12 put spds, 1.5 net/3QM over
  • -10,000 SFRN5 96.25 calls, 24-23.5 ref 96.27
  • +40,000 SFRZ5 98.00/99.00 call spds 5.0 vs. 96.52 to -.50/0.05%
  • 4,000 SFRH5 95.62/0QU5 96.37 put spds
  • 4,300 SFRM5 96.62 calls, 3.75 bid ref 95.91
  • 14,000 SFRU5 95.50/95.75 put spds ref 96.25 to -.255
  • 2,000 SFRM5 95.62/95.68/95.75 put flys ref 95.92
  • 2,800 0QU5 95.75/96.00 put spds
• Treasury Options:
  • 2,500 TYM5 110 puts, 46 ref 110-28.5
  • 5,000 TYM5 107/108 put spds ref 110-26.5
  • 2,500 TYK5 110.75/111.75 call spds ref 110-23.5
  • 3,500 TYM5 110 puts, 50 ref 110-22
  • 11,500 FVM5 107.5/108.75 strangles, 101.5
  • 2,000 USK5 107/107.5 call spds ref 114-05
  • over 12,700 TYK5 111.75 calls, 15 last
  • -5,400 TYK5 111.75 calls, 15 ref 110-24
  • +4,500 TYK5 108/109/110 put flys, 9 ref 110-21.5
  • -3,000 TYK5 111 puts, 48 vs 110-21.5/0.58%
  • +20,000 FVM5 110/111.5 call spds, 8.5 ref 108-01 to 107-31.5
  • +5,000 FVM5 108.5/109.5/110 broken call flys, 12 ref 108-02