SOFR: Net Long Setting & Short Cover Seen In Futures On Wednesday

OI data points to a mix of net short setting and long cover as most SOFR futures finished lower on Monday. Short setting was more prominent through the reds, before long cover moved to the fore further out the strip.

• In FX, EURUSD maintains a softer tone and the pair traded sharply lower Monday. Recent weakness appears corrective and key trend signals remain bullish. However, the pair has breached the 20-day EMA and pierced 1.1082, the 50-day EMA. A clean break of the average would strengthen a bear threat. A key resistance to watch is 1.1381, the May 2 - 6 high. Clearance of this level would signal the end of the correction.
• GBPUSD traded lower Monday as the pair extended the correction that started Apr 29. The 20-day EMA has been breached. Furthermore, a minor head and shoulders formation on the daily chart highlights a reversal and reinforces the likelihood of a corrective pullback near-term. Key support to watch is 1.3087, the 50-day EMA. The bull trigger is unchanged at 1.3444, the Apr 28 / 29 high. A break of this level would resume the uptrend.
• The primary trend condition in USDJPY is bearish and gains since Apr 22 appear corrective. This corrective cycle remains in play, for now. Resistance at the 50-day EMA, at 146.28, has been cleared, strengthening a bullish theme. The move high has exposed 148.54, the 76.4% retracement of the Mar 28 - Apr 22 bear leg (pierced). A break would open 149.28, the Apr 3 high. On the downside, a reversal lower would refocus attention on 142.36, May 6 low. A break of it would signal the end of the correction. Initial support is at 146.28, the 50-day EMA.

• Fed Funds implied rates sit between 1bp higher (Jul) and 1bp lower (Dec) for 2025 meetings overnight, broadly holding yesterday’s significant hawkish re-pricing on US-China trade de-escalation.
• It only just sees a next Fed cut fully priced for September (three meetings away) ahead of today’s US CPI report for April.
• MNI US CPI Preview here.
• Cumulative cuts from 4.33% effective: 2.5bp Jun, 11bp Jul, 27bp Sep, 41bp Oct and 57bp Dec.
• SOFR implied terminal yields are 4bp lower on the day at 3.39% (SFRZ6) for back to almost exactly at levels prior to initial Apr 2 Liberation Day tariff announcements.
• There is no Fedspeak scheduled for today. Two permanent voters in Waller and Jefferson are scheduled tomorrow before Powell follows just 10 minutes after US PPI and retail sales on Thursday.