COMMODITIES: Bear Threat for WTI Futures Present Despite Moderate Recovery

• CIBC are expecting the BOJ to hike this week, however, given most of the move is already priced in, they believe a hike would have minimal impact. Furthermore, CIBC expect the tone of the meeting will be dovish, which would dampen market enthusiasm of pricing in more hikes to come and they only expect the BoJ to deliver one hike this year.
• With this said, and counter to intuition, CIBC like positioning for USD/JPY appreciation ahead of the hike, and have recommended a tactical long at 156.00, with a target of 159.50 and a stop at 154.00
• Bolstering the trade, CIBC highlight that the Fed is more open to pausing, and with the US data not weak enough to warrant immediate cuts, a slower-than-anticipated pace for the Fed should dispel (or at least limit) any anticipation of rapid central bank divergence between US and Japan.
• Additionally, still attractive carry and a lower correlation to deteriorating risk sentiment should be supportive of the trade.

Bund block trade, suggest seller.

• RXH5 ~2.12k at 131.67.

Bund Swap related trade suggest Payer:

• RXH5 1.84k at 131.72.

Although U.S. liquidity is set to be limited by the MLK holiday, early London trade has seen some spread flow.in SFRU5/M6, with paper paying -2.0 on 11.2K. That may have been triggered by activity in SFRM5/M6, which saw paper pay -9.0 on 2.4K at the same time.