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MNI US MARKETS ANALYSIS - USD at Multi-Month Highs Pre-Payrolls


  • Payrolls take focus, with analysts expecting 720k jobs added
  • Markets may be geared for a stronger number, with whisper at 800k
  • USD holds recent gains, USD Index at best levels since April

US TSYS SUMMARY: A Little Higher Ahead Of Payrolls

Treasuries have moved a little higher in Europe after sideways Asia-Pac trade. Data is the focus of Friday's holiday-shortened session.

  • The 2-Yr yield is up 0.3bps at 0.2554%, 5-Yr is down 0.3bps at 0.8894%, 10-Yr is down 1.5bps at 1.4424%, and 30-Yr is down 1.9bps at 2.0417%.
  • Sep 10-Yr futures (TY) up 7.5/32 at 132-16, just through Thursday's highs (L: 132-09.5 / H: 132-16).
  • 0830ET brings the June employment report (we'll re-publish our preview shortly, plus some sell-side synopses) and May trade balance, then at 1000ET we get May final durable goods/factory orders.
  • Note SIFMA has recommended a 1400ET close for cash Tsys ahead of the Independence Day weekend. CME floor closes at 1300ET. Markets closed Monday 5th.
  • No supply or NY Fed operational purchases, and no Fed speakers scheduled.

EGB/GILT SUMMARY: Bull Flattening Ahead of US Payrolls

European sovereign bonds have rallied this morning and curves have bull flattened heading into today's US payrolls number. Equities are inching higher, while performance across G10 FX has been mixed.

  • Gilts have outperformed much of the EGB space with cash yields broadly 1-5bp lower and the curve 3-4bp flatter.
  • The longer-end of the bund curve has similarly outperformed with the 2s30s spread 3bp narrower.
  • OAT yields are now 1-3bp lower. It is a similar story for BTPs.
  • The DMO earlier sold GBP1.5bn of 1-/3-/6-month UKTBs.
  • There was no tier one European data published this morning.
  • The UK government is expected to end social distancing on July 19.
  • The UK's opposition Labour party held onto the crucal Batley and Spen parliamentary seat, providing breathing space for the party's beleaguered leader Kier Starmer.


OEU1 134.00/133.50 ps, bought for 12 in 2.5k

2LU1 99.25/12 ps, bought for 2.25 in 3k

FOREX: USD on Front Foot Pre-Payrolls

  • The greenback is edging higher early Friday, with EUR/USD and GBP/USD pushing to new weekly lows in an extension of the week's dominant trade. USD strength comes despite 10y yields holding under pressure for much of the past few days, with 10y yield circling the Wednesday lows of 1.4359%.
  • The JPY is similarly firm, with EUR/JPY rejecting yesterday's test of the 132.47 50-dma. A failure to break and close above this mark has prompted a near-term pullback, with 131.28 the first downside target.
  • AUD, NZD are among the session's poorest performers as markets consolidate ahead of the jobs release. Commodity-tied currencies watch the OPEC+ meeting, which unexpectedly extends into another day after the UAE threatened to withdraw support for any agreement.
  • Focus is unsurprisingly on the US jobs report, with markets expecting 720k jobs added, an uptick from May's 559k. Nonetheless, this month's whisper number is a touch higher at 800k.

FX OPTIONS: Expiries for Jul02 NY cut 1000ET (Source DTCC)

  • EUR/USD: $1.1750(E1.0bln), $1.1800-05(E544mln), $1.1820-25(E1.6bln-EUR puts), $1.1850-55(E2.66bln, E2.55bln EUR puts), $1.1865-66(E1.1bln), $1.1875-85(E924mln), $1.1895-1.1900(E2.2bln), $1.1915(E1.1bln), $1.1940-50(E3.9bln), $1.2025-35(E543mln)
  • USD/JPY: Y109.35-50($1.4bln), Y109.75($650mln), Y110.00($525mln), Y110.20-25($656mln), Y110.70-80($1.8bln), Y111.00($2.15bln), Y111.35-45($1.1bln), Y111.50($1.0bln-USD calls), Y111.75($2.0bln-USD calls), Y112.00($703mln-USD calls)
  • EUR/JPY: Y132.00-20(E582mln)
  • AUD/USD: $0.7495-00(E514mln), $0.7625(A$593mln)
  • NZD/USD: $0.7000-10(N$692mln)
  • USD/CAD: C$1.2250($988mln), C$1.2300($730mln), C$1.2325($855mln), C$1.2430-45($520mln), C$1.2500($700mln-USD calls)
  • USD/CNY: Cny6.32($1.6bln-USD puts), Cny6.35($960mln), Cny6.40($950mln), Cny6.45($875mln)

Price Signal Summary - USD Extends Gains

  • In the equity space, S&P E-minis continue to head north. The focus is on 4322.15, 0.764 projection of Mar 25 - May 10 - 13 price swing. EUROSTOXX 50 (U1) attention is on the bearish engulfing candle from Jun 18 that continues to warn of a short-term top in the trend. A break of 4015.00, Jun 21 low would reinforce the importance of the engulfing line and signal scope for a deeper pullback potentially below 4000.00 towards 3914.00, May 20 low.
  • In FX, the USD remains firm. EURUSD has cleared 1.1837, 76.4% of the Mar 31 - May 25 rally. The break opens 1.1795, Apr 6 low. GBPUSD is trading below 1.3787, Jun 21 low. The break signals scope for weakness towards 1.3717, Apr 16 low. USDJPY remains firm and has cleared 111.30, Mar 26, 2020 high. The focus turns to 111.71/86, Mar 24, 2020 high and 1.0% 10-dma envelope. Scope also exists for a climb towards 112.23, Feb 20, 2020 high.
  • On the commodity front, Gold broke lower Tuesday and breached support at $1761.1, Jun 18 low. The break highlighted resumption of the downtrend that started Jun 1 and note, the move also confirmed a bear flag that developed during the most recent consolidation phase. The focus is on $1733.5, 76.4% retracement of the Mar 8 - Jun 1 rally. Resistance to watch is at $1795.0, Jun 23 high. The Oil market trend condition remains bullish. Brent (U1) focus is $77.86, 1.382 projection of Mar 23 - May 18 - May 21 price swing. Support lies at $73.21, the 20-day EMA. WTI (Q1) sights are set on $77.35, 1.618 projection of Mar 23 - May 18 - May 21 price swing. Watch support at $71.72, the 20-day EMA.
  • Within FI,Bund futures are firmer. Key short-term directional triggers are unchanged at; support at 171.67, Jun 22 low and resistance at 173.16, Jun 11 high. Key support in Gilt futures are approaching key resistance at 128.39, Jun 11 high. A break would open 128.50, 1.00 projection of the May 13 - 26 - Jun 3 price swing. Key pivot support is at 126.70, Jun 3 low.

EQUITIES: European stocks edge higher, US largely unch

  • Japan's NIKKEI up 76.24 pts or +0.27% at 28783.28 and the TOPIX up 17.1 pts or +0.88% at 1956.31
  • China's SHANGHAI closed down 70.021 pts or -1.95% at 3518.76 and the HANG SENG ended 517.53 pts lower or -1.8% at 28310.42
  • German Dax up 37.25 pts or +0.24% at 15639.5, FTSE 100 up 13.1 pts or +0.18% at 7136.93, CAC 40 down 3.3 pts or -0.05% at 6549.81 and Euro Stoxx 50 up 4.1 pts or +0.1% at 4082.82.
  • Dow Jones mini down 11 pts or -0.03% at 34502, S&P 500 mini up 1.25 pts or +0.03% at 4312, NASDAQ mini up 17 pts or +0.12% at 14566.

COMMODITIES: Copper and platinum gain ahead of payrolls

  • WTI Crude down $0.12 or -0.16% at $75.07
  • Natural Gas down $0.03 or -0.71% at $3.637
  • Gold spot up $6.06 or +0.34% at $1783.4
  • Copper up $2.9 or +0.68% at $426.35
  • Silver up $0.1 or +0.39% at $26.1313
  • Platinum up $6.36 or +0.59% at $1093.49

MNI London Bureau | +44 203-865-3809 |
MNI London Bureau | +44 203-865-3809 |

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