MNI US MARKETS ANALYSIS - EUR Fades Further Off Key Resistance

US TSYS SUMMARY: Treasuries Twist Steepen Amidst Low Volumes

• Cash Tsys currently sit with a twist steepening that has developed through European hours, having initially opened flatter overnight, pushing new further inverted lows in both 2s10s and 5s30s, with 5s30s briefly the most inverted since Sep-2000.
• The move is potentially driven by Fed tightening expectations being trimmed on growth fears at the same time as QT implications on the longer end of the curve are brought more heavily into focus ahead of the FOMC minutes on Wed.
• 2YY -1bp at 2.446%, 5YY +1.2bps at 2.570%, 10YY +2.4bps at 2.406%, 30YY +4.0ps at 4.471%.
• TYM2 is down 6+ ticks at 122-01 in a relatively narrow range compared to recent moves, with very light volumes. Technicals remain unchanged from Friday: support and the bear trigger is seen at 120-30+ (Mar 28 low) with initial resistance higher at 123-12 (Mar 23 high).
• Data: Finalized February print for durable goods (0830ET).
• Bill issuance: US Tsy $57B 13W, $48B 26W bill auctions (1130ET).

US 2s10s (yellow) and 5s30s (white)Source: Bloomberg

STIR FUTURES: Fed Hike Expectations Pull Back In European Hours

• Fed hike expectations have dipped through European hours on broader risk-off moves, with FOMC-dated Fed Fund futures slipping from a high of 219bp overnight to 214bp.
• There was a similar move in front-end Tsy yields, with 2YY moving off new highs of 2.49% to sit at 2.45%, in turn trimming inversion after both 2s10s and 5s30s touched new lows on open.
• Immediate meetings are more subdued, with 45.5bps for May (as much of last week) and 89bp for June (seen after payrolls was in line, removing a potential obstacle for aggressive hikes).
• Little of note scheduled for today with only finalised durable goods at 1000ET. Brainard kickstarts the week’s Fedspeak tomorrow.

EUROPE ISSUANCE UPDATE:

Slovakia sells E175.3mln 2.25% Jun-68 SlovGB, Avg yield 2.2151%, Bid-to-cover 1.55x

EUROPE OPTION FLOW SUMMARY

Eurozone:
RXK2 157/155.5 1x2 put spread bought for 2 in 1.75k
RXK2 157/155 put spread bought for 27.5 in 2k
RXK2 155/154/153 put fly bought for 4.5 in 3k (hearing unwind)

OEK2 131.25/129.75/128.75 put fly sold at 66 in 1.4k
OEM2 129.25/130.25/131.25 put ladder bought for 14/14.5/15 in 7k
OEM2 127.50/126.50 1x1.5 put spread sold at 8.5 in 17k, 30k all day (earlier sold at 10.5/9)

FOREX: EUR Extends Pullback From Important Resistance

• EUR is underperforming so far Monday, with EUR/USD extending the pullback off last week's highs at 1.1185. An important S/T resistance has now been defined here, marking the Mar 31 high.
• Newsflow surrounding Ukraine remains a key focus, with reports suggesting a further pullback of Russian forces from cities and territories in the west and northern parts of the country - most notably the areas surrounding Kyiv. Despite the de-escalation of military tensions in these areas, accusations of uncovered evidence of war crimes will add additional pressure on western leaders to tighten the sanctions grip on Russia. This keeps energy prices underpinned on the continent and is helping CAD and NOK holding close to recent highs.
• SEK, EUR and JPY are among the poorest performers so far today, while AUD< CAD and NOK trade well.
• Data focus turns to February US factory orders and the final read for durable goods orders. The speaker slate is similarly light, with just BoE's Cunliffe on the docket.

FX OPTIONS: Expiries for Apr04 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0800(E1.2bln), $1.0865-75(E574mln), $1.1000-10(E1.1bln), $1.1100(E725mln)
• USD/JPY: Y122.50($509mln), Y123.50-60($799mln)
• EUR/GBP: Gbp0.8390-00(E611mln), Gbp0.8460(E793mln), Gbp0.8570-75(E611mln)
• USD/CNY: Cny6.3800($525mln)

Price Signal Summary - EURUSD Struggles To Remain Above Its 50-Day EMA

• In the equity space, short-term pullbacks in S&P E-Minis are still considered corrective. The bull cycle that started Mar 15, remains intact. The focus is on 4663.50, Jan 18 high. Watch initial resistance at 4633.44, 76.4% of the Jan 4 - Feb 24 downleg. The 50-day EMA continues to represent key support - it intersects at 4444.75. EUROSTOXX 50 futures maintain a short-term bullish tone and the most recent pullback is considered corrective. Last week’s break higher confirmed a bull flag breakout on the daily chart and price did trade above the 50-day EMA for a period. The focus is on 3965.50 next, the Feb 23 high. Support to watch lies at 3735.00, the Mar 18 low.
• In FX, EURUSD is lower this morning but, following last week’s gains and the break of 1.1137, Mar 17 high, maintains a bullish short-term tone. The bull trigger is 1.1185, the Mar 31 high. A resumption of gains would open 1.1232 initially, 61.8% of Feb 10-Mar 7 sell-off. Note that the pair also traded above the 50-day EMA last week, but has failed to remain above this average. This is a potential concern for bulls. Key support to watch is at 1.0945, the Mar 28 low. GBPUSD still appears vulnerable following the pullback from 1.3298, Mar 23 high. Prices have this week breached 1.3120, the Mar 22 low and this opens 1.3000, Mar 15 low and the bear trigger. Key resistance remains the 50-day EMA, at 1.3299 today. A break would signal a reversal. USDJPY remains in a corrective cycle following the pullback from the 125.09 trend high (Mar 28). Initial support has been established at 121.28, the Mar 31 low. A break of this level would trigger a deeper pullback and open 120.95, Mar 24 low ahead of the 120.00 handle. Initial resistance is seen at 123.20, Mar 30 high.
• On the commodity front, Gold is range bound but remains vulnerable. The yellow metal found support last week at $1890.2 on Mar 29 and this level represents the short-term bear trigger. Initial resistance is at $1966.1, Mar 24 high. In the Oil space, WTI traded lower Friday. A bearish threat remains present and the focus is on 50-day EMA at $97.38. A break would signal scope for a deeper pullback.
• In the FI space, the Bund futures primary trend direction remains down and current gains are considered corrective. Key near-term resistance is seen at 160.26, the 20-day EMA. A resumption of weakness would open the 156.00 handle. Gilts are firmer this morning and have broken out of the recent range. The contract has also moved above the 20-day EMA and this exposes key resistance at 122.72, the Mar 18 high. The broader trend direction is bearish though and gains are considered corrective. The bear trigger is at 119.86, the Mar 28 low.

EQUITIES: Hang Seng Closes Higher; Cyclical Stocks Lag In Europe

• Asian markets closed higher: Japan's NIKKEI closed up 70.49 pts or +0.25% at 27736.47 and the TOPIX ended 9.36 pts higher or +0.48% at 1953.63. The HANG SENG ended 462.76 pts higher or +2.1% at 22502.31T
• European equities are mixed, with healthcare/consumer stocks leading and financials/industrials lagging: the German Dax down 25.06 pts or -0.17% at 14422.3, FTSE 100 up 2.34 pts or +0.03% at 7539.32, CAC 40 down 9.45 pts or -0.14% at 6674.27 and Euro Stoxx 50 up 0.66 pts or +0.02% at 3918.53.
• U.S. futures are flat, with the Dow Jones mini down 30 pts or -0.09% at 34688, S&P 500 mini up 1.25 pts or +0.03% at 4540.5, NASDAQ mini up 26.75 pts or +0.18% at 14890.5.

COMMODITIES: WTI Crude Recovers Early Losses To Trade Back At $100

• WTI Crude up $0.84 or +0.85% at $100.2
• Natural Gas up $0.02 or +0.28% at $5.736
• Gold spot up $4.44 or +0.23% at $1930.28
• Copper up $2.95 or +0.63% at $471.9
• Silver up $0.16 or +0.65% at $24.7895
• Platinum up $5.05 or +0.51% at $994.63