BRAZIL: Trade Balance Rises To $4.2bn In February, Marginally Above Consensus

• RES 4: 1.2081 High Jan 27 and key resistance   
• RES 3: 1.2045 High Jan 28  
• RES 2: 1.1975 High Jan 30 
• RES 1: 1.1896 Low Jan 28
• PRICE: 1.1813 @ 16:11 GMT Feb 3
• SUP 1: 1.1776 Low Feb 2
• SUP 2: 1.1732 50-day EMA
• SUP 3: 1.1693 76.4% retracement of the Jan 19 -0 27 bull leg 
• SUP 4: 1.1670 Low Jan 22  

EURUSD is trading at its recent lows. A corrective cycle is in play following the sharp reversal from last week’s high. The move down highlights an unwinding of a recent overbought reading in the trend and the 20-day EMA, at 1.1792, has been pierced. A clear break of the EMA would open the 50-day EMA at 1.1732. A breach of this 50-day average would suggest scope for a deeper retracement. Initial firm resistance is at 1.1896, the Jan 28 low.               

Tuesday's Europe rates/bond options flow included:

• RX weekly 127.50/127.00 put spread 8K given at 9 (expire Friday)
• RXH6 127p, bought for 18 up to 18.5 in 6k
• ERZ6 98.25/98.37cs, bought for 1.75 in 17.5k
• ERZ6 98.00/98.06/98.12/98.25 call condor paper paid 0.25 on 39.5K all day, desks point to flow either being linked to ECB easing bias being in play at year-end (with no cut delivered) or a dovish hedge against deterioration in economic outlook/lower-than-expected inflation.
• SFIM6 96.40/96.50/96.80/96.90c condor, sold at 6.75 in 4k
• SFIM6 96.40/96.50/96.65/96.75 call condor paper paid up to 6.25 on 35K total. short vol play, targeting pricing of a 25bp cut when it expires on June 12, just over a week ahead of the BoE's June meeting
• SFIM6 96.55/96.70/96.85 call fly, bought for 2.75 in 5k
• SFIK6 96.60/96.75 call spread vs. 96.53 paper paid 2.0 on 10K

We have published and e-mailed to subscribers the MNI ECB Preview, found here. 

• See the report for MNI analysis including the net implications for inflation forecasts from recent euro and commodity price strength
• A detailed review of pertinent ECBspeak
• Key macro developments since the last ECB meeting
• A snapshot of 27 analyst views