US TSYS: Available "Extraordinary Measures" Pick Up Slightly From Lows

• RES 4: 1.4948 High Mar 2003
• RES 3: 1.4814 High Apr 2003 
• RES 2: 1.4503/1.4793 High Fb 4 / 3 and key resistance
• RES 1: 1.4380 High Feb 10     
• PRICE: 1.4227 @ 16:16 GMT Feb 19
• SUP 1: 1.4107 50.0% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
• SUP 2: 1.4011 Low Dec 5 ‘24
• SUP 3: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
• SUP 4: 1.3894 Low Nov 11 ‘24

USDCAD is recovering, but remains more broadly closer to recent lows. The pair has cleared key support at 1.4261, the Jan 20 low. This strengthens a bearish theme and signals scope for an extension of the current bear cycle - a correction. Scope is seen for a move towards 1.4107, a Fibonacci retracement. Initial firm resistance to watch is 1.4380, the Feb 10 high. A move above this hurdle would highlight an early bullish reversal signal. 

The Treasury curve leaned bear flatter Wednesday.

• Futures started on the back foot in a continuation of the bearish price action following last Friday's post-retail sales peak, with developments in Europe (hawkish ECB member commentary, mixed UK inflation data) weighing.
• But TYs would reclaim ground largely in two moves: first around the equity cash open, through no particular trigger (data including housing starts were soft but overall mixed), and second after the release of the January FOMC minutes which suggested that some participants eyed a precautionary end to QT earlier than markets are anticipating.
• Conversely, the 20Y Bond auction tailed by 1bp, a return to weak form after a strong prior sale in January - the Treasury market reaction was negative but brief (half a tick lower in TYs).
• Even Fed cut expectations ticking higher (about 3bp for 2025), the belly of the curve modestly underperformed. Latest cash levels: The 2-Yr yield is down 3.6bps at 4.2697%, 5-Yr is down 3.9bps at 4.363%, 10-Yr is down 2.2bps at 4.5288%, and 30-Yr is down 0.6bps at 4.7597%. In futures, Mar 10-Yr futures (TY) up 4.5/32  at 108-31.5 (L: 108-21.5 / H: 109-00)
• Looking ahead, Fed's Jefferson speaks after the cash close (subject: household balance sheets).
• Thursday's schedule includes the Philly Fed manufacturing survey alongside weekly jobless claims, while the highlight of the Fedspeak schedule is St Louis's Musalem.

The futures-implied Fed funds path shows slightly more anticipated easing following the release of the January FOMC minutes.

• We would attribute this dovish reaction mainly to speculation that the Fed may be closer to ending QT than previously thought based on the extensive discussion on balance sheet policy in the January meeting minutes (though as we noted earlier, it seems such sentiments remain in the minority on the Committee).
• While the minutes release nudged cumulative 2025 pricing less than 1bp lower, the biggest move of the session was on headlines earlier in the session on US -Ukraine-Russia negotiations which appeared to help steer rates and equities lower.
• The first full 25bp rate cut remains priced only by September's meeting but more fully after today's moves (27bp vs 25bp prior session), with cumulative cuts for 2025 totaling 37-38bp to 3.96% (vs 35bp and 3.94% prior).