MNI US MARKETS ANALYSIS - Tsy Curve, USD Lower Pre-Fed

US TSYS SUMMARY: FOMC Tops Data, Chairman Powell Presser, Forward Guidance Focus

• With ongoing hikes likely deemed "appropriate" focus on statement and any clue to magnitude of Sep 21 annc given softer economic data and moderating inflation expectations.
• Bonds underperforming 10s, TYU2 contract maintains a firmer short-term tone and price is trading closer to the top of this month's range. Attention is on the bull trigger at 120-16+, the Jul 6 low.
• Data on tap: U.S. durable goods orders, wholesale inventories & pending home sales.
• Treasury auctions: $24B 2Y FRN note auction (91282CFD8) at 1300ET after $30B 119D bill auction at 1130ET.
• Currently, the 2-Yr yield is unchanged at 3.0528%, 5-Yr is down 2.2bps at 2.8818%, 10-Yr is down 1.1bps at 2.7959%, and 30-Yr is down 0.3bps at 3.0243%.

EGB/GILT SUMMARY: Awaiting The Fed

European government bonds have traded weaker this morning alongside gains for equities and G10 FX vs the US dollar as markets await the FOMC meeting later today.

• Gilts have sold off with the curve bear steepening. Cash yields are up 3-6bp while the 2s30s spread has widened 1bp.
• Bund yields are now 3-4bp higher on the day.
• OAT yields are similarly up 3-4bp.
• BTPs have significantly underperformed core EGBs with spreads widening. Cash yields are 4-11bp higher with the belly of the curve leading the charge.
• Supply this morning came from the UK (Gilts, GBP700mn), Germany (Bund, EUR3.298bn allotted), Italy (BOTs, EUR6bn) and Greece (GTBs, EUR625mn).
• Ahead of the FOMC decision, US durable goods orders data will be published.

EUROPE OPTION FLOW SUMMARY

DUU2 109.60/109.30ps vs 110.30/110.60cs, bought the ps for 3.5 in 17k

EUROPE ISSUANCE UPDATE

Germany allots E3.298bln 1.70% Aug-32 Bund, Avg yield 0.94% (Prev. 1.22%), Bid-to-cover 0.90x (Prev. 0.87x), Buba cover 1.10x (Prev. 1.09x)

UK DMO sells GBP700mln 0.125% Mar-51 linker, Avg yield -0.583% (Prev. -2.191%), Bid-to-cover 2.28x (Prev. 2.04x)

FOREX: Dollar Down to Start Off Fed Day

• The greenback is modestly softer ahead of the Fed rate decision and press conference later today, with the USD Index edging off the week's best levels printed ahead of the Tuesday close. Losses are minor, however, with most major pairs trading wholly inside the week's range.
• EUR/GBP holds the bulk of the week's losses and is within range of support at yesterday's low of 0.8405 and July 13th's 0.8403. A break through here would put the cross at the lowest level since mid-May.
• Pessimism surrounding Eurozone growth prospects continues to disseminate across markets, with gas flow to Europe via the Nord Stream 1 pipeline constrained further still Wednesday. Maintenance work surrounding a turbine at a particular compressor has restricted flow to 20% of capacity, supporting energy prices to new highs across the continent.
• Elsewhere, NOK is extending its recent streak of outperformance, with EUR/NOK accelerating lower on the break of the 200- and 100-dma supports during the Tuesday session. This puts the cross at the lowest levels since early May and through the 50% retracement for the April - June upleg this year.
• Focus rests on the Fed rate decision later today, with markets fully pricing a 75bps move higher later today and partial pricing of a more aggressive move. Data is also due, with prelim June durable goods, pending home sales as well as advance trade balance.

FX OPTIONS: Expiries for Jul27 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0100(E1.5bln), $1.0125(E650mln), $1.0197-10(E1.7bln), $1.0250-55(E1.2bln), $1.0270(E533mln), $1.0300(E1.1bln)
• EUR/JPY: Y142.40(E1.4bln)
• USD/CAD: C$1.2750($590mln), C$1.2850-55($850mln), C$1.2910-25($648mln)
• USD/CNY: Cny6.7000($1.2bln), Cny6.7500($617mln)

Price Signal Summary - Oil Futures Remain Below The 50-Day EMA Pivot Resistance

• In the equity space, S&P E-Minis have recovered from Tuesday’s low. A short-term bullish theme remains intact and recent gains signal potential for an extension. A resumption of gains would pave the way for a climb towards 4145.75 next, the Jun 9 high. The 20-day EMA, at 3900.64, is the first support to watch. EUROSTOXX 50 futures are unchanged and continue to consolidate. This pause in the current bull cycle still appears to be a bull flag. If correct, it reinforces short-term bullish conditions and suggests scope for a break higher to open 3689.00, the Jun 10 high. Initial support is at 3467.00, Jul 18 / 19 low.
• In FX, EURUSD traded lower Tuesday. Price remains below immediate resistance at 1.0278, the Jul 21 high. The move lower yesterday raises the risk of a return back toward recent lows below parity, at 0.9952 (Jul 14). To the upside, a break above 1.0278 would once again resume short-term bullish conditions and open 1.0359, Jun 15 low. GBPUSD is consolidating and trading at its recent highs. A continuation higher would expose the 50-day EMA, at 1.2213. Key support and the bear trigger is at 1.1760, the Jul 14 low. Weakness in USDJPY is still considered corrective and attention is on two key support levels; 135.30, the base of a bull channel drawn from the Mar 4 low, and 134.27, the Jun 23 low. A break of this support zone would signal scope for stronger reversal. The primary uptrend remains intact. 139.39 is the bull trigger, Jul 14 high.
• On the commodity front, Gold remains in a downtrend and the latest recovery is likely a correction. The bear trigger is unchanged at $1681.0, the Jul 21 low. Key short-term resistance to watch is at $1745.4, the Jul 13 high. In the Oil space, WTI futures trend conditions remain bearish. The contract continues to trade below the 50-day EMA that intersects at $101.18. The average represents an important pivot point - if breached, the move higher would signal scope for a stronger rally. While the EMA offers resistance, the outlook is bearish and the first support to watch is $93.01, the Jul 25 low.
• In the FI space, a short-term bull cycle in Bund futures remains in play. The contract traded higher Tuesday, confirming a resumption of the upleg. The focus is on 157.21, 1.50 projection of the Jun 16 - 24 - 28 price swing. The trend condition in Gilts remains bullish. The focus is on 118.16, 1.382 projection of the Jun 16 - 24 - 29 price swing.

EQUITIES: NASDAQ leading the way higher pre-Fed

• Japan's NIKKEI up 60.54 pts or +0.22% at 27715.75 and the TOPIX up 2.58 pts or +0.13% at 1945.75.
• China's SHANGHAI closed down 1.681 pts or -0.05% at 3275.755 and the HANG SENG ended 235.84 pts lower or -1.13% at 20670.04.
• German Dax up 9.65 pts or +0.07% at 13105.8, FTSE 100 up 30.57 pts or +0.42% at 7336.47, CAC 40 up 28.84 pts or +0.46% at 6239.15 and Euro Stoxx 50 up 21.28 pts or +0.6% at 3596.45.
• Dow Jones mini up 168 pts or +0.53% at 31899, S&P 500 mini up 39.5 pts or +1.01% at 3962.75, NASDAQ mini up 195.75 pts or +1.62% at 12307.5.

COMMODITIES: European natgas leading the gains on low Nord Stream flows

• WTI Crude up $0.86 or +0.91% at $95.86
• Natural Gas (NYM) up $0.04 or +0.46% at $9.101
• Natural Gas (ICE Dutch TTF) up $17.08 or +8.54% at $217
• Gold spot up $6.4 or +0.37% at $1723.92
• Copper up $4.15 or +1.23% at $342.7
• Silver up $0.13 or +0.7% at $18.7661
• Platinum up $3.62 or +0.41% at $880.14