FOREX: Westpac See Merit in Sticking with Core AUD Longs

• Fed Funds implied rates for 2025 meetings have pulled a touch back from Friday’s shift back towards their most hawkish since February but still hold the bulk of the increase seen on a solid payrolls report.
• Cumulative cuts from 4.33% effective: 0bp Jun, 4.5bp Jul, 18.5bp Sep, 30.5bp Oct and 46.5bp Dec.
• As you can see from the table below, the path is back close to levels seen shortly before higher jobless claims a week and a half ago started a run of dovish data that was reversed with the payrolls report.
• There are slightly larger shifts further out the curve but the broad takeaway remains -- the SOFR implied terminal yield of 3.39% (SFRZ6) is 4.5bp lower on the day but still 7bp higher since NFPs after Friday saw its highest close since May 14.
• It’s a quiet data docket both today and tomorrow, with data focus firmly on Wednesday’s CPI report for May.
• The FOMC is now in media blackout ahead of the Jun 17-18 meeting.

• RES 4: 111-30   76.4% retracement of the May 1 - 22 downleg
• RES 3: 111-19+ 1.0% 10-dma envelope
• RES 2: 111-14+ High Jun 5 & 61.8% of the May 1 - 22 downleg
• RES 1: 110-20+ 50-day EMA   
• PRICE:‌‌ 110-03+ @ 11:04 BST Jun 9
• SUP 1: 109-26   Low May 29          
• SUP 2: 109-12+ Low May 22 and the bear trigger 
• SUP 3: 109-09+ Low Apr 11 and key support
• SUP 4: 108-25+ 0.764 proj of the Apr 7 - 11 - May 1 price swing

The reversal in Treasury futures from last Thursday’s high, undermines a recent bullish theme. An extension would expose support at 109-26, the May 29 low, where a break would open key support and the bear trigger, at 109-12+, the May 22 low. Key short-term resistance has been defined at 111-14+, a Fibonacci retracement and the Jun 5 high. A break of this hurdle would be bullish.

BTP Block trade, suggest buyer:

• IKU5 ~1.1k at 121.06.

So far the BTP/Bund spread finds good support at the big Psychological 90bps level.