MNI US MARKETS ANALYSIS - Fed Pricing Backtracks Off Cycle Highs

US TSYS: Tsys Off Lows, Sights on ISM Services, Fed Speakers

• Data kicks off at 0945ET (prior, est): S&P Global US Services PMI (50.5, 50.5); Composite (50.2, --) followed by ISM Services at 1000ET Services Index (55.2, 54.5); Prices Paid (67.8, --), Employment (50.0, --) and New Orders (60.4, --).
  
• Scheduled Fed speakers on tap:
  • Dallas Fed Logan, opening remarks Booth School event, text, 1100ET
  • Atl Fed Bostic, recorded comments at racial inequality conf at 1200ET
  • Fed Gov Bowman Booth School panel on mkt dysfunction, text, Q&A at 1500ET
• Note: Atl Fed Bostic spurred late risk-on move late Thu after unscheduled conf call w/ reporters. Wires lead with dovish tones (favors 25bp hike in March .. maybe pause late summer) on otherwise balanced comments: “There is a case that could be made that we need to go higher" while "inflation is remaining stubborn at elevated levels, labor markets remain quite tight."

RATINGS: Friday’s Sovereign Rating Slate

Sovereign rating reviews of note scheduled for after hours on Friday include:

• Fitch on Austria (current rating: AA+; Outlook Negative) & the Czech Republic (current rating: AA+; Outlook Negative)
• Moody’s on Hungary (current rating: Baa2; Outlook Stable)
• S&P on Cyprus (current rating: BBB; Outlook Stable)
• DBRS Morningstar on the European Union (current rating: AAA, Stable Trend)

EQUITIES: Stocks Creep Back Toward 4,000

• E-mini S&P showing above yesterday's highs in recent trade, putting futures on a positive footing and indicating a green open for Wall Street in a few hours' time.
• Prices narrowing in on a test of the psychological 4,000 handle with 3995.25 resistance giving way - a break above here opens congestion at 4003.25-50 printed Tuesday as well as the week's best levels of 4024.75.
• Equities aided by the moderation in 10 y yields, which have dipped back below the 4.00% handle to mirror waning Fed rate hike expectations: implied peak rate in September has slipped to 5.43% today, a drop of over 8bps off yesterday's cycle highs.

FOREX: Greenback Edges Lower on Low Volume Profit-Taking

• The greenback is softer early Friday, with markets happy to take profits on the Thursday dollar rally after Bostic's appearance late yesterday. Bostic seemed to reinforce that while further tightening is a near-certainty from the Fed, a re-acceleration of rate hikes beyond 25bps is less likely. As a result, the greenback is the poorest performer in G10 ahead of the NY crossover, although recoveries in the likes of the EUR, GBP have been shallow.
• Additionally, participation has been low, with volumes and activity generally comfortably below recent averages for this time of day. GBP trades more favourably, with GBP benefiting from an upside revision to the final February services and manufacturing PMI releases.
• Unusually for the first Friday of the month, there is no Nonfarm Payrolls release today (3rd March is too close to the end of the survey period for the data to be compiled), keeping focus on the ISM Services Index later today after the market-moving manufacturing release this week.
• Outside of data releases, Fed's Logan, Bostic and Bowman are all scheduled to make appearances - although none of speeches are seen addressing policy directly.

FX OPTIONS: Expiries for Mar03 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0500(E1.8bln), $1.0550(E577mln), $1.0595-00(E2.2bln), $1.0625-35(E893mln), $1.0675(E969mln), $1.0700-05(E1.8bln)
• USD/JPY: Y135.00($795mln), Y136.00($718mln)
• GBP/USD: $1.2060(Gbp645mln)
• AUD/USD: $0.6800(A$951mln)
• NZD/USD: $0.6100(N$1.0bln)
• USD/CAD: C$1.3500-15($591mln), C$1.3600($702mln)
• USD/CNY: Cny6.9000($1.3bln), Cny7.0000($800mln)

EQUITIES: E-Mini S&P Trend Conditions Bearish Despite Recovery From Thursday Low

• Eurostoxx 50 futures remain above last 4175.00, the Feb 24 low. Key support to watch is 4202.50, the base of a bull channel drawn from the Oct 13 low - the line was pierced yesterday. While channel support holds, the broader uptrend remains intact and a resumption of gains would expose the bull trigger at 4323.00, Feb 16 high. A break of this hurdle would resume the uptrend. On the downside, a breach of the channel base alters the picture.
• S&P E-Minis trend conditions are bearish despite the recovery from Thursday’s session low. Price remains below the 50-day EMA, at 4018.89 and sights are set on 3901.75, the Jan 19 low and 3887.62, the 76.4% retracement of the Dec 22 - Feb 2 bull cycle. Resistance to watch is at both the 50-day EMA and 4033.48, the 20-day EMA. Note that a clear break of both these EMAs would signal a possible reversal.

COMMODITIES: Gold Trades Ahead of 50-Day EMA

• WTI futures remain above the Feb 22 low of $73.80. The contract has continued to appreciate this week and yesterday breached resistance at the 50-day EMA - the average intersects at $77.92. A continuation of gains would signal scope for a test of resistance at $80.78, the Feb 13 high. On the downside, a breach of support at $73.80 is required to reinstate the recent bearish theme.
• Trend conditions in Gold remain bearish and price is trading just ahead of the 50-day EMA, at $1846.0. The bearish break of the 50-day EMA, in mid-February, strengthened the case for bears. Sights are on $1800.0 and $1787.3, the 50.0% retracement of the uptrend between Sep 28 2022 and Feb 2. On the upside, a clear break of the 50-day EMA would ease bearish pressure and signal scope for a strong short-term bounce.