MNI US MARKETS ANALYSIS - Markets See Pickup in Payrolls

US TSYS SUMMARY: Tight Range Ahead Of Payrolls

A very tight overnight range for Treasuries (4 ticks between TY low and high) and meagre volumes, befitting little headline / macro news and uncertainty ahead of a much-anticipated nonfarm payrolls release.

• Sep 10-Yr futures (TY) up 1/32 at 131-20 (L: 131-18 / H: 131-22); ~180k traded.
• The 2-Yr yield is up 0.4bps at 0.1586%, 5-Yr is up 0bps at 0.8399%, 10-Yr is down 0.4bps at 1.6215%, and 30-Yr is unchanged at 2.296%.
• The May employment report is out at 0830ET: wide range of estimates out there (+335k to +1m), with BBG median +674k/MNI dealer median +650k. Plenty of attention on potential revisions to April, as well as the finer details in the release.
• Pres Biden set to deliver some remarks on the jobs report at 1015ET. (Also set to speak again w Sen Capito on infrastructure; reports Thurs suggested Republicans poised to reject Biden's 15% "tax floor" proposal.)
• Then we get Apr durable / capital goods (finals) and factory orders at 1000ET.
• Fed Chair Powell provides the last scheduled speaker slot of the pre-FOMC blackout period, at 0700ET (albeit on a climate panel). No text.
• No supply; NY Fed buys ~$3.225B of 7-10Y Tsys.

EGB/GILTS SUMMARY: A Fairly Steady Session for EGBs

A fairly steady session for EGBs, volumes are elevated, but driven by rolling position into September.

• Bund trades in the green and in a 23 ticks range (171.41-171.64), as the street awaits for the US NFP release.
• German curve trades flat, while peripheral move a touch wider against Germany. Italy leading at 0.7bp wider.
• Gilts trade in a 17 ticks range (126.74-126.91), with desk likely positioning ahead of the US release.
• The contract trades in line with Bund, with the spread 0.2bp tighter.
• Looking ahead, all eyes on US NFP, Bloomberg economist estimates have widened to a range of 335k to 1mln.
• US Factory orders are also scheduled as well as Durable goods, but final reading for the latter.
• SPEAKERS ECB Villeroy and Fed Powell on BIS climate panel. And G7 meet in London.
• After market, rating from Fitch on Italy, DBRS on Germany and Moodys on Turkey

EUROPE OPTION FLOW SUMMARY

Eurozone:
0EU1 99.625/99.50ps, bought for 1.5 in 5.7k

3RM1 100.37/25ps 1x2, sold at 7.5 in 2k (ref 100.23)

UK:
L Z1 100.12/100ps, sold at 12 in 10k
0LM1 99.75/62/50p fly sold at 3.75 in 4k (ref 99.71, -80d)

Equities:
SX7E Dec 95/80ps, trades 4.30 in 16k

FOREX: USD Mixed Pre-Payrolls, GBP Bouncing

• After a convincing late-Thursday rally, the USD is mixed headed into NY hours, with the USD index holding just above 90.50 and comfortably off last week's cycle lows.
• GBP is among the strongest in G10, with GBP/USD bouncing smartly off yesterday's lows. The rate eyes resistance at 1.4146 and 1.4185 before the cycle highs of 1.4248 can be challenged.
• JPY also trades firm, reversing recent underperformance. The medium-term trend remains bullish, with prices holding well north of the Y110 handle at pixel time.
• NOK and CAD are the weakest ahead of the NY crossover, with oil markets stalling ahead of cycle highs Thursday.
• The May jobs report takes focus going forward, with consensus seeing job gains of 674k jobs added across the month, pressing the unemployment rate lower by 0.2ppts to 5.9%. Markets may be gearing for a higher-than-consensus release, however, with the whisper number today at 800k.

FX OPTIONS: Expiries for Jun04 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.2050-70(E673mln-EUR puts), $1.2100(E1.1bln), $1.2120-30(E684mln-EUR puts), $1.2150(E1.1bln), $1.2170-85(E1.2bln-EUR puts), $1.2200(E1.1bln-EUR puts)
• USD/JPY: Y107.90-00($800mln), Y109.90-110.00($876mln-USD puts), Y110.20-30($625mln-USD puts), Y110.40-50($610mln-USD puts)
• EUR/GBP: Gbp0.8550(E680mln-EUR puts)
• AUD/USD: $0.7490(A$503mln), $0.7725-30(A$1.0bln), $0.7750-55(A$512mln), $0.7780-0.7800(A$1.1bln-AUD puts)
• USD/CNY: Cny6.39($1.2bln), Cny6.40($1.0bln-USD puts), Cny6.41($630mln-USD puts), Cny6.45($1.0bln-USD puts)

Price Signal Summary - USDJPY Bulls Have The Year High In Their Sights

• In the equity space, S&P E-minis intraday volatility persisted this week, with the first support at the 20-day EMA of 4170.22 probed. Attention is on key resistance at 4238.25 May 10 high. The broader key trend support is unchanged at 4029.25, May 13 low.
• In the FX space, price action Thursday worked against the EURUSD bullish outlook. The pair has breached the initial key short-term support at 1.2133, May 28 low. This has exposed the 50-day EMA at 1.2096, also seen as a key short-term support handle. GBPUSD traded above resistance at 1.4237, Feb 24 high earlier this week but has since pulled back. A clear break higher would confirm a resumption of the broader uptrend. Support to watch lies at 1.4092, May 27 low. This has been probed and any deeper pullback would expose 1.4006, May 13 low and the 50-day. USDJPY has breached 110.20, May 28 high, resuming the recent recovery. The focus is on 110.97, Mar 31 high. Key support is 109.33, Jun 1 low.
• On the commodity front, Gold faced strong selling pressure yesterday and together with the recent overbought condition, the move lower suggests scope for a deeper corrective pullback. The next support is $1852.3, May 19 low. Trend conditions in Oil remain bullish. Brent (Q1) gains have opened $72.21 next, 0.764 projection of the Mar 23 - May 18 - May 21 price swing. WTI (N1) is approaching the $70.00 psychological level.
• Within FI, Bunds (U1) remain below the 50-day EMA at 172.01. While it holds, the outlook is bearish. A clear break of the average is required to highlight scope for further gains. Support is at 170.99. May 31 low. Gilts (U1) remains below resistance at 127.74/82, highs between Apr 20 and May 26. A bearish risk remains present.

EQUITIES: Stocks Ebb Lower Pre-Payrolls

• Continental equity markets are in the red, although losses are muted at the midway point, although Spain's IBEX-35 has shed 0.7%. The EuroStoxx50 sits just underwater, lower by 0.15% at pixel time.
• Europe's industrials and consumer discretionary names are leading declines, only partly countered by gains in real estate and consumer staples.
• In futures space, markets are broadly flat, with the post-payrolls reaction likely to decide whether Wall Street opens higher or lower later today.

COMMODITIES: WTI, Brent Stalling Ahead of Cycle Highs

• Both WTI and Brent crude benchmarks are in modest positive territory early Friday, although gains are stalling ahead of cycle highs printed earlier in the week.
• Gold trades steady, but came under further pressure in overnight Asia-Pac trade, pressing prices briefly to $1856.18 before rebounding amid thin liquidity.
• Both metals and energy likely pressing pause ahead of today's Nonfarm Payrolls release, with first support for gold sitting at the overnight lows ahead of the 200-dma at $1841.70.