US TSY FUTURES: BLOCK: Late 2Y/10Y Ultra Flattener

In the wake of the unchanged issuance guidance in the February Treasury Quarterly Refunding Announcement, TD Securities has pushed back its expectation for Treasury's next coupon upsizing to November, from August previously: "While we think an August increase is reasonable given the deficit financing needs, Treasury's goal of being "regular and predictable" wouldn't make the current guidance consistent with changes in August."

• "Maintaining the language around keeping auction sizes unchanged against TBAC's recommendation might imply that Treasury is in no rush to decrease the share of bills outstanding and term out the debt further."
• November is very much firmly consensus among analysts.
• Jefferies concurs with the November timing, writing post-Refunding: "This is now the fourth straight quarter where Treasury has used the "several quarters" language, which suggests to us that they do not anticipate having to increase coupon sizes until at least the November 2025 Refunding. Treasury Secretary Bessent has been critical of his predecessor's reliance on short-term bill issuance, implying an intention to increase issuance in longer maturities. Today's announcement suggests that this term-out is going to take a long time to execute."

Aussie was one of the better G10 performers on Wednesday helped by a better risk tone. AUDUSD rose 0.5% to 0.6286. It reached a high of 0.6297 after disappointing US services ISM data. The USD index fell 0.2%.

• AUDUSD continues to recover from Monday’s losses but the trend remains bearish. Initial support is at 0.6171, February 4 low, and resistance at 0.6305, 50-day EMA.
• The yen was the strongest in the G10 which left AUDJPY down 0.6% to 95.98. Kiwi also did well and AUDNZD is 0.1% lower at 1.1053. AUDEUR rose 0.2% to 0.6042 though and AUDGBP +0.3% to 0.5028.
• Equities were stronger with the S&P up 0.2% and Euro stoxx +0.1%. Oil prices fell sharply with Brent -1.9% to $74.75/bbl. Copper rose 2.0% but iron ore is lower around $104/t.
• Today December trade data print. The surplus is forecast to narrow to $6.5bn from $7.08bn. 

• RES 4: 1.5000 Psychological round number 
• RES 3: 1.4948 High Mar 2003  
• RES 2: 1.4814 High Apr 2003
• RES 1: 1.4600/1.4793 Round number resistance / High Feb 3    
• PRICE: 1.4296 @ 16:16 GMT Feb 5  
• SUP 1: 1.4270 Low Feb 5
• SUP 2: 1.4261 Low Jan 20 and a key support
• SUP 3: 1.4178 High Nov 6 ‘24
• SUP 4: 1.4120 Low Dec 11

The reversal in USDCAD from Monday’s high extended again Wednesday. For now, a move down is considered corrective and the primary uptrend remains intact. Monday’s cycle high, reinforces and strengthens bullish conditions. The break higher confirmed a resumption of the uptrend and opens 1.4814 next, the Apr 2003 high. Key support to watch lies at 1.4261, the Jan 20 low. A clear breach of this level would signal a reversal.