EQUITIES: EU Bank Put Spread vs Call Spread

Ongoing DeepSeek-driven risk off has weighed on the risk-sensitive Scandi currencies, with EURSEK up 0.35% and EURNOK up 0.55% at typing. EURSEK has pierced trendline resistance drawn from the November 21 high, exposing the 38.2% retracement of the September to November bull leg at 11.5329 on the upside.

• The Riksbank decision headlines this week’s Swedish calendar. Although a 25bp cut is widely expected by analysts (21/22 of those surveyed by BBG expect such a decision), it is only ~80% implied by markets.
• Although this suggests scope for some short-term SEK weakness in the event of a 25bp cut, the dovish signal will likely be countered by cautious policy statement and press conference language.
• There is a heavy Swedish data calendar this week too, with the flash Q4 GDP indicator, household lending, retail sales and Economic Tendency Indicator all scheduled. These will be key inputs into the Riksbank’s assessment of the economy and the impact of past rate cuts, but will play a more prominent role in March, where an updated MPR and rate path will be presented. 

• RES 4: 159.45 High Jul 12  
• RES 3: 159.26 0.618 proj of the Sep 16 - Nov 15 - Dec 3 price swing
• RES 2: 158.08/87 High Jan 15 / 10 and the bull trigger 
• RES 1: 156.75 High Jan 23       
• PRICE: 153.87 @ 11:20 GMT Jan 27
• SUP 1: 153.34 Low Dec 18  
• SUP 2: 152.55 61.8% retracement of the Dec 3 - Jan 10 bull leg
• SUP 3: 151.81 Low Dec 12   
• SUP 4: 151.06 76.4% retracement of the Dec 3 - Jan 10 bull leg   

The primary trend condition in USDJPY remains bullish, however, today’s move down suggests scope for a stronger short-term bearish cycle. The pair has cleared two important support points; 155.15, the 50-day EMA (pierced), and 154.97, a trendline drawn from the Sep 16 ‘24 high. This paves the way for an extension towards 152.55, a Fibonacci retracement point. Initial firm resistance has been defined at 156.75, the Jan 23 high.

• Fed Funds implied rates are sharply lower from Friday’s close on broad risk-off on the back of the tech-led equity sell-off.
• This week’s decision is still seen as a lock-in for a pause, but a 25bp cut in March is starting to be seen as closer to 50/50 call with 10bp priced. June is still the next meeting with a 25bp cut fully priced though.
• Fed Funds last priced >50bp of cuts for 2025 briefly before the hawkish Dec 18 FOMC decision and before that Dec 13. It leaves the end-2025 point back in line with the median FOMC dot from that decision, having climbed from the 32bp priced before CPI less than two weeks ago.
• Cumulative cuts from 4.33% effective: 0.5bp Jan, 10bp Mar, 18.5bp May, 31bp Jun, 35.5bp Jul and 51bp Dec.