US OUTLOOK/OPINION: Payrolls Growth Seen Moderating Despite Returning Strikers

Better call buying resumed after SOFR & Treasury options appeared mixed on lighter volumes Wednesday morning. Underlying futures bounced off early session lows as Pres Trump's cabinet meeting rekindled market concerns over global trade policy. Projected rate cuts through mid-2025 have firmed up from morning levels (*) as follows: Mar'25 at -0.7bp (-0.5bp), May'25 at -6.9bp (-6.4bp), Jun'25 at -21.5bp (-19.6bp), Jul'25 at -29.6bp (-27.6bp).

• SOFR Options:
  • +8,000 0QN5/2QN5 96.50/97.00 call spd strip, 24.75-25.0
  • +7,000 SFRM5 95.62 puts, 1.0
  • Block, +15,000 2QM5 96.75/97.00 call spds vs. 95.50/95.75 put spds, 1.0 net calls over
  • Block, 10,000 2QM5 96.50/96.75 call spds vs. 95.50/95.75 put spds, 4.0 net calls over
  • +5,000 SFRU5 98.00/99.00 2x3 call spds 2.0 ref 96.045
  • +5,000 SFRM5 95.62 puts 1.0 ref 95.865
  • +5,000 SFRJ5 95.75/96.00 1x2 call spds, 3.5 ref 95.87
  • +3,000 0QH5 96.18/96.31 strangle, 13.5
  • -5,000 SFRZ5 95.68/95.93 put spds 9.5 ref 96.18
  • +50,000 SFRM5 96.18/96.62 call spds .62 on legs
  • 16,000 0QK5 96.62/96.93 call spds ref 96.295
  • 5,000 SFRZ5 95.50/95.87 put spds ref 96.175
  • 2,500 SFRZ5 96.12/96.37/96.62 put flys
  • 6,500 0QH5 95.93/96.06/96.18 put flys ref 96.25 to -.235
  • 4,000 2QJ5 96.25/96.50/96.62 broken call flys ref 96.27
• Treasury Options:
  • Block, total 105,000 TYK5 113.5 calls, 19 vs. 110-20/0.17%
  • +15,000 TYK5 112 calls, 33 ref
  • -6,750 USJ 119/122 call spds, 33
  • over -7,000 USJ5 119/122 call spds, 33 ref 117-09
  • -10,000 wk4 TY 111 calls, 6
  • 4,500 TYK5 114.5 calls, 10 ref 110-18
  • +30,000 TYJ5 109/109.5 put spds, 9 ref 110-11.5
  • over 5,500 TYJ5 110.5 calls, 42 last ref 110-12
  • over 12,200 TYK5 110.5 calls ref 110-123,100 TYK5 106/108 put spds vs. TYM5 105/107 put spd spds
  • 2,000 FVK5 106.75/107.5/108 broken call flys ref 107-12.75

• RES 4: 161.35 61.8% retracement of the Dec 30 - Feb 10 bear leg     
• RES 3: 161.19 High Feb 13       
• RES 2: 160.09 50-day EMA and key short-term resistance 
• RES 1: 158.61 20-day EMA
• PRICE: 156.90 @ 16:21 GMT Feb 26
• SUP 1: 155.82/155.61 Low Feb 21 / 10 and the bear trigger 
• SUP 2: 155.15 Low Sep 16 ‘24
• SUP 3: 154.42 Low Aug 5 ‘24 and key medium-term support
• SUP 4: 153.87 Low Dec 14 ‘23

EURJPY is unchanged and the cross maintains a softer tone. Sights are on key short-term support at 155.61, the Feb 10 low. Clearance of this level would highlight an important bearish break and set the scene for an extension towards 155.15, the Sep 16 ‘24 low, and 154.42, the Aug 5 ‘24 low and a key medium-term bear trigger. Initial firm resistance to watch is 158.61, the 20-day EMA. Key resistance is 160.09, the 50-day EMA.   

• Crude markets have extended yesterday’s losses today amidst concerns around the US economy following a weak consumer confidence reading on Tuesday.
• Prospects of a peace deal between Russia and Ukraine continue to add to bearish pressure, coupled with talk that tariffs will take effect from April.
• WTI APR 25 is down by 0.2% at $68.8/bbl.
• A bearish theme in WTI futures remains intact, with next resistance seen at $67.75, the Dec 20 ‘24 low.
• Meanwhile, Henry Hub has pulled back to its lowest level since Feb 18 amid the March 25 contract expiry today and weaker demand as temperatures have recovered from last week’s cold.
• US Natgas MAR 25 is down by 6.4% at $3.91/mmbtu.
• In the metals space, copper has outperformed today, after President Trump threatened to place import tariffs on all forms of the metal.
• Copper rose to a high at $475/lb early in the session, before paring some of the move, with the red metal currently up by 1.1% at $458/lb.
• Copper futures remain in a bull cycle, with initial resistance at $488.50, the Feb 14 high, followed by round number resistance at $500.
• Finally, spot gold is broadly unchanged at $2,916/oz.
• A bull cycle in gold remains intact with sights on $2,962.2, a Fibonacci projection. The first key support to watch is $2,882.4, the 20-day EMA.