USDCAD TECHS: Recovery Extends

• RES 4: 1.4660 2.0% 10-dma envelope
• RES 3: 1.4564 3.500 proj of the Oct 17 - Nov 1 - 6 price swing
• RES 2: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
• RES 1: 1.4516 High Jan 21  
• PRICE: 1.4439 @ 16:32 GMT Jan 29 
• SUP 1: 1.4261 Low Jan 20
• SUP 2: 1.4259 50-day EMA
• SUP 3: 1.4120 Low Dec 11 
• SUP 4: 1.4011 Low Dec 5

USDCAD continues to trade inside a range. Recent price action highlights resistance at 1.4516, the Jan 21 low, and support at 1.4261, the Jan 20 low. Both levels represent important short-term directional triggers. The trend condition is bullish and a clear breach of 1.4516 would confirm a resumption of the bull cycle. For bears, a move through 1.4261 and 1.4259, the 50-day EMA, would instead highlight a possible reversal. 

Treasury options dominated volumes leading up to today's FOMC policy announcement, turning mixed after the Fed held rates steady. Underlying futures trading modestly weaker, off FOMC lows, curves flatter (2s10s -1.263 at 32.067). Projected rate cuts through mid-2025 have receded vs. early Wednesday (*) levels as follows: Mar'25 at -5.1bp vs. -7.8bp, May'25 at -12.1bp vs. -15.4bp, Jun'25 at -23.5 vs. -26.5bp, Jul'25 at -29.0bp vs. -32.6bp.

• Treasury Options:
  • +10,000 TYH5 108.5 puts, 36
  • Block, 7,500 TYK5 112 calls, 23 vs. 108-31.5/0.13%
  • 7,300 USH5 108 puts, 3 ref 114-01, total volume over 22,800
  • 2,500 FVH5 108/108.75 1x2 call spds ref 106-15.25
  • 1,500 USH5 107/109/111 put flys ref 114-04
  • -7,500 TYH5 109/109.25 strangles, 1-18 ref 109-04.5
  • +5,000 TYH5 106/107 put spds, 3 ref 109-07
  • -15,000 USH5 110 puts, 8, total volume over 16,700
  • +20,000 TUH4 102.5 puts, 3 appr 1.76 vo for 25bp OTM put that expires on Feb 21
  • +15,000 TYH5 110.5 calls, 16-17 ref 109-05 to -06
  • Block, 12,500 wk5 TY 109.5 calls, 10 ref 109-08.5
  • +70,000 wk5 10Y 109.5/110 call spds, 7 ref 109-07 (40k Block soon after -unwind)
  • Adds to Block: 36,000 FVH5 106/107.5 put over risk reversals
  • Block, +45,000 FVH5 106/107.5 put over risk reversals, 4.5 vs. 106-19.25//0.51%
  • 1,000 TYH5 107/107.5/108.5 1x3x2 broken put flys
  • +2,500 TYH5 103/104.5/107 broken put flys, 5 ref 109-06.5
  • 3,000 TYH5 106/107 put spds ref 109-07.5
  • -1,500 FVH5 107.75 calls, 7 vs. 106-19.25/0.17%
  • +3,500 TYH5 108 puts, 16 ref 109-07
  • -3,500 TYJ5 106 puts, 10 ref 109-05
• SOFR Options:
  • -5,000 SFRN5 95.62/96.37 strangle 12.0 ref 96.015
  • Block, 5,000 SFRM5 95.87/96.00 call spds, 1.5 vs. 95.765/0.08%
  • -15,000 0QH5 96.62/97.12 1x2 call spds, 0.75 vs. 96.145/0.05%
  • +40,000 0QK5 96.31/96.50/96.62/96.93 broken call condors, 1.5 ref 96.125
  • +15,000 SFRZ5 97.00/0QZ5 97.50 call spds, 3.5
  • 1,800 SFRH5 95.75/95.81/95.88 call flys ref 95.785
  • +5,000 2QH5 95.75/96.50 put over risk reversals, 1.0 vs. 96.08/0.36%
  • 3,500 SFRM5/SFRU5 95.75/96.06 call spd spd
  • 5,750 SFRN5 95.87/96.00/96.12 call flys ref 96.06

• Treasuries gapped lower after the FOMC left the target rate steady at 4.25-4.5 but removed reference to making progress towards inflation reaching goal. Guidance unchanged. The apparent hawkish shift in the statement saw the US$ climb to near early session highs, while stocks extended lows as the prospect of lower rates moved further out the curve.
• Chairman Powell dispelled the initial hawkish take as he explained we "were just cleaning up the language: We took out a reference to since earlier in the year as it related to the labor market, and we just chose to to shorten that sentence."
• Stocks bounced off lows after Chairman Powell said "the Labor Market is not a source of significant inflationary pressures. Inflation is eased significantly over the past two years, but remains somewhat elevated relative to our 2% longer-run goal."
• Treasuries recovered to steady/mildly mixed as Powell stated "inter meeting data was good, and there was another inflation reading just before the December meeting. So we've got two good readings in a row that are consistent with 2% inflation. Again, we're not going to overinterpret, two good or too bad, readings, but this was not meant to send a signal."
• Cross asset update: BBG US$ index reversed initial gain to currently 1301.58 (+.39) vs. 1303.92 post FOMC; Gold well off lows (2757.14 -6.34); stocks pare losses with SPX Eminis at 6069.0 vs. 6042.25 low.