MNI US MARKETS ANALYSIS - Treasury Curve a Touch Steeper Pre-Fed

US TSYS SUMMARY: A Bit Of Steepening Pre-FOMC

The Tsy curve is a little steeper Wednesday ahead of the July FOMC decision.

• The 2-Yr yield is up 0.2bps at 0.2055%, 5-Yr is up 2bps at 0.7191%, 10-Yr is up 1.2bps at 1.2527%, and 30-Yr is up 1.6bps at 1.9092%.
• Sep 10-Yr futures (TY) down 3/32 at 134-12 (L: 134-09.5 / H: 134-17). OK volumes (~310k).
• Focus is on the 1400ET FOMC decision, with Powell's presser at 1430ET.
• Equities have found their footing from Tuesday's lows, with S&P eminis back around the 4,400 mark.
• Data includes weekly MBA mortgage apps (0700ET), and at 0830ET, retail/wholesale inventories alongside advance goods trade balance.
• $28B 2Y FRN / $30B 119-day bill auction at 1130ET. No NY Fed operational purchases due to the Fed meeting.

EGB/GILT SUMMARY: Mixed Session Ahead of Tonight's FOMC

Gilts have weakened a touch this morning while EGBs have broadly firmed alongside gains for equities.

• Gilt started on a strong foot before weakening through the morning. Cash yields are now 1bp higher on the day with the curve close to flat overall.
• Bunds have firmed with yields 1bp lower across much of the curve.
• The OAT curve has steepened slightly on the back of the short end firming and long end yields inching higher.
• BTPs have been relatively directionless this morning and currently trade just above yesterday's close.
• Supply this morning came from Germany (Bund, EUR1.79bn) and Italy (Bills, EUR7bn).
• The Nationwide house price index show UK property prices dropping 0.5% M/M in July, though still recording a 10.5% annualised climb.

EUROPE ISSUANCE UPDATE

Germany allots E1.79bn of the 0% May-36 Bund: Average yield -0.18%, Buba cover 1.1x, bid-to-cover 0.796x

EUROPE OPTION FLOW SUMMARY

Eurozone:
RXU1 174.5/1725ps 1x2, bought for 16 in 1k

DUU1 112.30/112.20ps 1x2 bought for 2.25 in 4k

FOREX: USD gives back some of its overnight gains

USD started the European session on the front foot, a continuation from the Asian session.

• The Dollar was up across G10s, besides the CAD, but the Greenback has faded some of the bid, after Equities moved to session high.
• Now, only the JPY, NZD and AUD are still down versus the USD.
• EURUSD is a 28 pips range (1.1802/1.1830), and worth noting 3.05bn between 1.1790 and 1.1825 of option expiry for today.
• The pound is having a good session, but Cable has been choppy, initially rallying to 1.3895, to then quickly fading to the session low at 1.3862, and now trading back at 1.3887.
• Resistance in Cable comes at 1.3910 (High Jul 12 and a key resistance)
• NOK and CAD were initially under some pressure, as WTI slipped below $72, but crosses have reversed the early price action, following WTI breaking back above $72.
• Looking ahead, US Whole sales inventory, is the main data for the session.
• We also get the Canadian CPI, but most of the attention will be on the FOMC and presser.

FX OPTIONS: Expiries for Jul28 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1790-00(E1.7bln), $1.1820-40(E2.1bln), $1.1850-60(E1.6bln), $1.1880-00(E1.6bln)
• USD/JPY: Y110.00-20($713mln), Y110.25-40($878mln), Y110.65-70($910mln)
• GBP/USD: $1.3685-00(Gbp569mln)
• AUD/USD: $0.7390(A$710mln)
• USD/CAD: C$1.2555-65($510mln)

Price Signal Summary - S&P E-Minis Find Support Once Again

• In the equity space, the S&P E-minis pullback is considered corrective. The outlook is bullish and the focus is on 4420.92, 0.764 projection of the Jun 21 - Jul 14 - 19 price swing. Support is seen at 4336.88, the 20-day EMA. EUROSTOXX 50 futures recently traded above the important 4101.50 resistance, Jul 1 high. An extension would open the 4153.00 key resistance, Jun 17 high. Support to watch is at 4029.50, Jul 22 high.
• In FX, the USD outlook is unchanged and remains bullish. EURUSD is slightly firmer but remains in a tight range. The outlook is bearish and the focus is on 1.1704, Mar 31 low and a key support. Resistance is at 1.1851, Jul 15 low. GBPUSD is holding onto recent gains and testing the 50-day EMA at 1.3884. A clear break of the average is required to strengthen a bullish case. Currently, recent gains are still considered corrective. Watch resistance at 1.3910, Jul 12 high. USDJPY is lower but remains above 109.07, Jul 19 low. This represents a key S/T support and the bear trigger. Key near-term resistance is 110.70, Jul 14 high. A break of 110.70 would be bullish.
• On the commodity front, Gold is consolidating and maintains a bullish tone with the focus on the bull trigger at $1834.1, Jul 15 high. Key short-term support is at $1791.7, Jul 12 low and has recently been tested and briefly probed. A clear break of this level would be bearish. Brent (U1) has cleared $73.87, 61.8% of the Jul 6 - 20 downleg and is approaching $75.39, the 76.4% level. A break would open $76.72, Jul 14 high. WTI (U1) is firmer and the focus is on $73.46, 76% of the Jul 6 - 20 downleg.
• Within FI, Bund futures remain firm and have edged higher today. Sights are on 176.64, the Feb 11 high (cont). Gilts maintain a bullish tone. The recent break of 129.92, Jul 8 high opens 130.72, 2.236 projection of the May 13 - 26 - Jun 3 price swing. We are still monitoring a bearish candle pattern, an evening star reversal from the Jul 21 close. A deeper pullback would expose 128.54, low Jul 14.

EQUITIES: Hang Seng Bounces, But Upside is Shallow

• Japan's NIKKEI down 388.56 pts or -1.39% at 27581.66 and the TOPIX down 18.39 pts or -0.95% at 1919.65
• China's SHANGHAI closed down 19.593 pts or -0.58% at 3361.59 and the HANG SENG ended 387.45 pts higher or +1.54% at 25473.88 with the German Dax up 25.15 pts or +0.16% at 15547.47, FTSE 100 up 10.9 pts or +0.16% at 7008.16, CAC 40 up 45.46 pts or +0.7% at 6579.68 and Euro Stoxx 50 up 22.4 pts or +0.55% at 4087.85.
• Dow Jones mini down 52 pts or -0.15% at 34906, S&P 500 mini up 1.75 pts or +0.04% at 4396.75, NASDAQ mini up 24.25 pts or +0.16% at 14972.

COMMODITIES: Copper Edges Further Off Week's High

• WTI Crude up $0.37 or +0.52% at $72.04
• Natural Gas down $0.07 or -1.66% at $3.905
• Gold spot up $0.62 or +0.03% at $1799.81
• Copper down $0.6 or -0.13% at $454
• Silver up $0.11 or +0.43% at $24.799
• Platinum up $0.62 or +0.06% at $1055.92