MNI US MARKETS ANALYSIS - RBA Continuity Does Little to Prop the Currency

US TSYS: Tsy 10Y Marks New 16Y High: 4.7036%

• Cash Tsys running weaker, low end of narrow overnight range, Tsy yields marking new 16Y highs: 10Y +.0251 at 4.7036% vs. last Thu's high of 4.6861%. Short end narrowly outperform as Tsy curves continue to bear steepen: 2Y10Y +1.458 at -41.308, 5Y30Y +1.229 at 9.038.
• The bear trend in Treasuries remains intact, maintaining the bearish price sequence of lowers and lower highs. Tsy 10Y futures closing in on initial technical support at 107-05, 1.382 Fibonacci proj of the Jul 18 - Aug 4 - Aug 10 price swing.
• Scheduled data limited to JOLTS Job Openings at 1000ET, main focus on ADP early Wednesday ahead Friday's September Jobs data. Meanwhile, Atlanta Fed Pres Bostic will attend a moderated discussion on his 2024 economic outlook, not livestreamed, no embargoed text.
• Rate hike projections into early 2024: November moderating after bouncing Monday: November at 28.4% vs. 30.5% late Monday w/ implied rate change of +7.1bp to 5.400%. Projections holding steady for next two meeting: December cumulative of 12.9bp at 5.457%, January 2024 12.9bp at 5.458%. Fed terminal at 5.46% in Jan'24-Feb'24.

Short Setting Seemed To Dominate SOFR On Monday

The combination of yesterday’s bear steepening on the SOFR strip and preliminary open interest data point to short setting being the dominant positioning factor on the SOFR strip on Monday.

• The reds saw the most pronounced round of apparent short setting on a pack basis, although pockets of long cover were seen across the curve.

EUROPE ISSUANCE UPDATE

• GBP2.25bln 1.50% Jul-53 Green Gilt. Avg. Yield 4.936% (bid-to-cover 2.83x). Not the strongest 30-year Green Gilt auction with the LAP below the pre-auction mid-price and a tail of 1.0bp. Since July the average tail at a gilt auction has been 1.3bp, and last week's 10-year Green Gilt auction saw a tail of 1.3bp - so it's fairly in keeping with other recent auctions.

• E920mln 2.90% Feb-33 RAGB. Avg. Yield 3.504% (bid-to-cover 2.64x, allotted E800mln).
• E345mln 3.15% Oct-53 RAGB. Avg. Yield 3.786% (bid-to-cover 2.72x, allotted E300mln).

FOREX: RBA Continuity Does Little to Prop the Currency

• The RBA kept policy unchanged - as expected - and made very little change to the policy statement. The Board retained its tightening bias, keeping options open for the November 7 decision.
• The decision did little to restore stability in the currency however, with AUD/USD edging through the late September lows to print the lowest levels since November last year. The pair through the bear trigger next opens the 0.63 handle support ahead of 0.6272. AUD remains the poorest performer in G10 headed into the NY crossover.
• NZD has been dragged lower alongside AUD, while the EUR is the session's best performer. Equity markets across Europe appear to have bottomed, which has lent some support to EUR/USD, helping the pair off overnight lows of 1.0460. Nonetheless, there are scant signs of a stronger reversal, with spot unable to retake the 1.05 handle at pixel time.
• The USD Index sits just below a fresh trend higher printed overnight at 107.21. This extends the medium-term uptrend posted off the July lows, with 107.993, the 21 Nov'22 high, the next upside level of note.
• Focus turns to JOLTS job data as markets look to parse all labour market indicators ahead of Friday's payrolls report. Markets expected the US to have added 170k jobs over the month, with ample focus on any negative revisions given the trend so far in 2023.

FX OPTIONS: Expiries for Oct03 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0495(E1.0bln), $1.0810(E1.9bln)
• USD/JPY: Y146.70($762mln), Y147.50($1.3bln), Y149.80-00($1.3bln)
• GBP/USD: $1.2100(Gbp555mln)
• USD/CAD: C$1.3600($1.2bln), C$1.3675($543mln), C$1.3900($1.0bln)

EQUITIES: E-Mini S&P Trading Close to Recent Lows

• Eurostoxx 50 futures trend conditions remain bearish and the latest bounce has been corrective. The contract has traded below 4128.00, the Sep 27 low. A continuation lower would confirm a resumption of the downtrend that started late July and signal scope for a move towards 4109.90, a Fibonacci projection. Initial firm resistance is at 4237.60, the 20-day EMA. A break of this average would signal a possible short-term base.
• A bear cycle in S&P E-minis remains in play and the contract is trading closer to its recent lows. The recent break of support at 4397.75, the Aug 18 low, reinforced bearish conditions and signals scope for a continuation lower. Sights are on 4242.15, a Fibonacci retracement point. Initial firm resistance is 4461.47, the 50-day EMA. Ahead of the 50-day average is resistance at 4399.00, the Sep 22 high, and 4415.45, the 20-day EMA.

COMMODITIES: Corrective Cycle in WTI Futures Remains in Play

• WTI futures have started the week on a bearish note and a corrective cycle is in play. The contract has traded through support at $88.19, the Sep 26 low. The breach highlights a short-term top and signals scope for a move towards the 50-day EMA, which intersects at $84.37 today. A clear break of this average would strengthen a bearish condition. On the upside, key short-term resistance has been defined at $95.08, the Sep 28 high.
• Gold started this week’s session on a bearish note and the metal is trading lower again today. The recent sell-off resulted in a break of support at $1901.1 and this was followed by a breach of $1884.9, the Aug 21 low. This confirmed a resumption of the downtrend that started early May. Attention is $1804.9, the Feb 28 low and a key support. On the upside, firm resistance is at $1898.1, the 20-day EMA.