MNI US MARKETS ANALYSIS - USD/JPY Reverses Off Highs

Highlights:

• US yields backtrack off highs after shaky 7y note sale
• USD/JPY trades heavy across Asia-Pac, European hours
• Secondary US GDP accompanies weekly jobless claims

US TSYS: Off Midweek Lows Ahead Q1 GDP, Weekly Claims, Personal Consumption Data

• Treasuries have bounced off midweek lows, drifting near overnight highs with  focus on this morning's Q1 GDP, personal consumption and weekly jobless data  at 0830ET. Following yesterday's post-7Y auction sell-off, market should see  little influence on rates as US Treasury rounds up this week's supply with  $70B 4- and 8W bill auctions at 1130ET.
• Cash yields lower, 10s -.0219 at 4.5898%, 30s -.0188 at 4.7140%, curves  mildly flatter after bear steepen this week, 2s10s -1.360 at 37.656.
• Switching to Sep'24 futures the day before First Notice, heavier volumes  overnight with TYU4 over 480k vs. 199k TYM4. Despite this morning's bounce,  Treasuries remain vulnerable to a bearish theme after Wednesday's reversal  extension from the May 16 high. The Sep'24 10Y contract has pierced 108-02+,  the 76.4% retracement of the Apr 25 - May 16 climb.
• Scheduled Fed speakers include NY Fed President Williams speech at the  Economics Club of NY (text, Q&A) at 1205ET; Dallas Fed President Logan will  participate in a moderated Q&A in El Paso at 1700ET.
• Moderate US$ corporate bond issuance limited to Bank of Bahrain & Kuwait 5Y,  National Bank of Kuwait 6NC5 today.

STIR: OI Points To Mix Of Positioning Swings In SOFR Futures On Wednesday
The mix of yesterday's twist steepening on the SOFR futures strip and preliminary OI data follows to the following net positioning swings on Wednesday:

• Whites: Net long setting in SFRH4 through SFRU4. It is hard to be sure when  it comes to SFRZ4 given its unchanged price status on the day.
• Reds: A mix of net long cover and net short setting, with the latter being  the prominent in net pack OI terms.
• Greens: A mix of net short setting and net long cover, with the former being  slightly more prominent in net pack OI terms.
• Blues: A mix of net short setting and net long cover, with the former being  slightly more prominent in net pack OI terms.
• Cross-market impulses provided much of the pressure for SOFR futures. ~32.5bp of '24 cuts are priced into FOMC-dated OIS.

EUROPE ISSUANCE UPDATE:

Italy auction results:
* E2.5bln of the 3.35% Jul-29 BTP. Avg yield 3.54% (bid-to-cover 1.48x).
* E1.5bln of the 3.85% Dec-29 BTP. Avg yield 3.57% (bid-to-cover 1.59x).
* E3.5bln of the 3.85% Jul-34 BTP. Avg yield 3.97% (bid-to-cover 1.45x).
* E1bln of the 1.05% Apr-32 CCTeu. Avg yield 4.9% (bid-to-cover 1.82x).
* E1bln of the 0.65% Apr-29 CCTeu. Avg yield 4.52% (bid-to-cover 1.79x).

Finland auction results (ORI Facility):
* E190mln of the 0.50% Apr-26 RFGB. Avg yield 3.196% (bid-to-cover 2.06x).
* E193mln of the 1.375% Apr-47 RFGB. Avg yield 3.288% (bid-to-cover 1.60x).

FOREX: USD/JPY Reverses Off Highs, But Weakness Looks Corrective

• In a partial reversal of the recent rally, USD/JPY was sold across Asia-Pac  hours, and traded heavy through the European open. Moves concurred with rates  markets fading somewhat after the sharp run higher in US yields since the  beginning of the week. The US10y yield faded around 5bps off highs, favouring  USD/JPY selling and adding to the downward momentum. That said, the pair  remains within range of the Y157.00 handle and support should be found into  156.50.
• Antipodean currencies are trading poorly, with AUD and NZD softer to provide  a generally poor risk backdrop to G10 currency markets, although more stable  equity markets should prevent any protracted fallout.
• Outside of G10 markets, much market focus is on the ZAR as the Presidential  election results begin to roll in and show the ANC with a poorer showing than  expected, exposing the party to being forced into a market-unfriendly  coalition. ZAR is lower by close to 2% against the USD, trading levels last  seen in early May.
• Weekly jobless claims data, advanced trade balance stats and the pending home  sales release for April are set to cross later today. The speaker slate could  be of more consequence, with Fed's Williams & Logan and ECB's Makhlouf all  due to make appearances.

OPTIONS: Expiries for May30 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0735-50(E2.6bln), $1.0775(E843mln), $1.0800(E524mln), $1.0825-35(E2.0bln), $1.0850($1.5bln), $1.0900-01(E1.2bln)
• USD/JPY: Y155.00($2.2bln), Y155.90-10($5.6bln), Y157.00($706mln), Y158.00($624mln), Y158.50($1.5bln), Y159.35($808mln), Y160.00($834mln)
• GBP/USD: $1.2540-50(Gbp797mln), $1.2655-60(Gbp631mln)
• EUR/JPY: Y169.70(E616mln), Y170.00(E630mln), Y170.85-00(E615mln)
• AUD/USD: $0.6525(A$709mln), $0.6700(A$932mln)
• USD/CAD: C$1.3695-00($824mln)

WTI Futures Remain Below Wednesday's Highs

• WTI futures traded higher yesterday and the contract is holding on to its most recent gains. The trend direction remains down and the latest recovery appears to be a correction - for now. A resumption of weakness would signal scope for a move towards $75.64, the Mar 11 low. Key resistance and the bull trigger is at $86.16, the Apr 12 high. Initial firm resistance to watch is at $83.63, the Apr 26 high.
• Gold is trading lower today and a short-term bear cycle remains in play, for now. The medium-term trend structure is bullish and the recent move down appears to be a correction that is allowing  an overbought condition to unwind. Moving average studies are in a bull-mode position, highlighting an uptrend. A resumption of gains would open $2452.5 next, a Fibonacci projection. The 50-day EMA, at $2305.5, represents a key support. 

E-Mini S&P Extends Corrective Pullback Lower

• Eurostoxx 50 futures traded lower yesterday and the contract remains soft today. This week’s pullback has resulted in a breach of the 20- and 50- day EMAs. The 50-day average lies at 4963.20 and a clear break of it would undermine the recent short-term bullish theme and signal scope for a deeper retracement. This would open 4894.90, a Fibonacci retracement. Initial resistance is seen at 5022.40, the 20-day EMA.
• The uptrend in S&P E-Minis remains intact, however, a corrective cycle has resulted in a pullback from the recent high of 5368.25 (May 23). The contract has traded through the 20-day EMA and this exposes a firmer support at 5208.12, the 50-day EMA. A clear break of this average would signal scope for a deeper retracement. On the upside, a resumption of gains and a break of 5368.25, would confirm a resumption of the uptrend.      
   

Date	GMT/Local	Impact	Country	Event
30/05/2024	1230/0830	***	US	Jobless Claims
30/05/2024	1230/0830	***	US	GDP
30/05/2024	1230/0830	*	CA	Current account
30/05/2024	1230/0830	*	CA	Payroll employment
30/05/2024	1230/0830	**	US	Advance Trade, Advance Business Inventories
30/05/2024	1400/1000	**	US	NAR Pending Home Sales
30/05/2024	1430/1030	**	US	Natural Gas Stocks
30/05/2024	1455/1055		CA	BOC payment director gives speech in Toronto.
30/05/2024	1500/1100	**	US	DOE Weekly Crude Oil Stocks
30/05/2024	1530/1130	*	US	US Bill 08 Week Treasury Auction Result
30/05/2024	1530/1130	**	US	US Bill 04 Week Treasury Auction Result
30/05/2024	1605/1205		US	New York Fed's John Williams
30/05/2024	2100/1700		US	Dallas Fed's Lorie Logan
31/05/2024	2330/0830	**	JP	Tokyo CPI
31/05/2024	2330/0830	*	JP	Labor Force Survey
31/05/2024	2350/0850	*	JP	Retail Sales (p)
31/05/2024	2350/0850	**	JP	Industrial Production
31/05/2024	0130/0930	***	CN	CFLP Manufacturing PMI
31/05/2024	0130/0930	**	CN	CFLP Non-Manufacturing PMI
31/05/2024	0600/0800	**	DE	Retail Sales
31/05/2024	0600/0800	**	DE	Import/Export Prices
31/05/2024	0600/0700	*	GB	Nationwide House Price Index
31/05/2024	0630/0730		GB	DMO to release FQ2 (Jul-Sep) gilt operations calendar
31/05/2024	0630/0830	**	CH	Retail Sales
31/05/2024	0645/0845	***	FR	HICP (p)
31/05/2024	0645/0845	**	FR	PPI
31/05/2024	0645/0845	**	FR	Consumer Spending
31/05/2024	0645/0845	***	FR	GDP (f)
31/05/2024	0800/1000	***	IT	GDP (f)
31/05/2024	0830/0930	**	GB	BOE M4
31/05/2024	0830/0930	**	GB	BOE Lending to Individuals
31/05/2024	0900/1100	***	EU	HICP (p)
31/05/2024	0900/1100	***	IT	HICP (p)
31/05/2024	1230/0830	**	US	Personal Income and Consumption
31/05/2024	1230/0830	***	CA	GDP - Canadian Economic Accounts
31/05/2024	1230/0830	***	CA	Gross Domestic Product by Industry
31/05/2024	1230/0830	***	CA	CA GDP by Industry and GDP Canadian Economic Accounts Combined
31/05/2024	1230/0830	**	US	WASDE Weekly Import/Export
31/05/2024	1345/0945	***	US	MNI Chicago PMI
31/05/2024	1500/1100		CA	Finance Dept monthly Fiscal Monitor (expected)
31/05/2024	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
31/05/2024	2215/1815		US	Atlanta Fed's Raphael Bostic