US OUTLOOK/OPINION: Unemployment Rate Seen Holding Pullback From Recent High

Mixed SOFR/Treasury wing trades reported Tuesday in addition to some chunky strangle sales as underlying futures drifted lower while projected rate cuts through mid-2025 continued to recede vs. this morning levels (*) as follows: Jan'25 at -1.2bp (-2.3bp), Mar'25 -10.2bp (-10.9bp), May'25 -14.7bp (-16.3bp), Jun'25 -23.2bp (-24.2bp).

• SOFR Options:
  • -4,000 SFRF5 95.81 puts, 3.5 ref 95.79
  • +10,000 SFRH5 96.12/96.37 call spds even over 20,000 95.56 puts
  • +5,000 SFRF5 95.68 puts, 0.5 vs. 95.775/0.10%
  • +10,000 0QJ5 95.50 puts, 7.5 vs. 96.005/0.20%
  • +10,000 SFRM5/SFRU5 97.00 call spds, 4.25
  • -4,000 SFRZ5 96.25/96.75 call spds vs 95.37 puts, 0.5
  • 5,000 0QF5 95.87/96.12 strangles 
  • -10,000 SFRM5 95.43/95.56 put spds, 075 ref 95.92
  • +5,000 SFRM5 95.43/95.56 put spds vs SFRZ5 95.25/95.37 put spds 1.5 net
  • +5,000 SFRU5 98.00 calls 3.0 ref 95.985
  • +5,000 SFRH5 95.81 puts, 9.0 vs. 95.79/0.25%
  • -2,000 SFRU5 95.75 straddles vs. 96.12 calls, 31.0 net
  • +10,000 SFRH5 95.87 puts, 12.5 ref 95.805
  • 1,500 0QF5 96.00/96.18 2x1 put spds ref 96.015
  • +15,000 0QZ5 97.00/98.00 call spds 9.5 vs. 95.96/0.14%
  • 4,000 0QH5 96.75 calls ref 96.025
  • 2,500 SFRH5 95.81/95.87/95.93 call flys ref 95.81
• Treasury Options:
  • -10,750 TYH5 108/108.5 strangles, 144 ref 108-07.5
  • 7,000 TYG5 108 puts, 33 ref 108-02, total volume over 20.3k
  • 5,000 USH5 106/110 put spds ref 112-23
  • 2,500 TYG5 111/114.75 1x2 call spds ref 108-16
  • 2,900 TUH5 103.25/103.62/103.87/104.25 call condors ref 102-24.25
  • 3,000 TYH5 108.5 straddles ref 108-16.5
  • 2,300 wk2 TY 109/109.5/110 call flys ref 108-15.5  (expire Jan 10)
  • over 11,000 wk3 FV 107.25/107.5/107.75 call flys ref 106-03.75 (expire Jan 17)
  • 5,600 FVG5 106.75 calls ref 106-04
  • 2,100 TYH5 105/107/109 put flys ref 108-18.5
  • 2,000 TYH5 109/110/111 call flys ref 108-16.5

• RES 4: 166.53 2.0% 10-dma envelope
• RES 3: 166.10 High Nov 6  
• RES 2: 165.04 High Nov 15 and a key short-term resistance
• RES 1: 164.40 Intraday high
• PRICE: 163.44 @ 19:52 GMT Jan 7 
• SUP 1: 162.46/160.91 20-day EMA / Low Jan 2    
• SUP 2: 160.54 50.0% retracement of the Dec 3 - 30 bull cycle   
• SUP 3: 159.51 61.8% retracement of the Dec 3 - 30 bull cycle
• SUP 4: 158.67 Low Dec 11

EURJPY has traded higher this week but remains below the Dec 30 high. The recent move down appears corrective and a bullish short-term condition is intact. The next support to watch lies at 160.54, 50.0% of the Dec 3 - 30 bull cycle. The 61.8% level is at 159.51. A resumption of gains would open 165.04, the Nov 15 high. Clearance of this hurdle would expose 166.69, the Oct 31 high and a major resistance.

• RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
• RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
• RES 1: 95.851 - High Dec 11 
• PRICE: 95.440 @ 19:34 GMT Jan 7
• SUP 1: 95.373 - 0618 proj of the Dec 11 - 23 - 31 price swing  
• SUP 2: 95.275 - Low Nov 14
• SUP 3: 94.590 - 1.0% 10-dma envelope

The Aussie 10-yr futures contract continues to trade below the Dec 11 high of 95.851. The contract has traded through the Dec low. A stronger bearish reversal would expose 95.275, the Nov 14 low and a key support. A break of this level would strengthen a bearish theme. For bulls, a reversal higher and a breach of 95.851, the Dec 11 high, would instead reinstate a bull cycle and refocus attention on resistance at 96.207, a Fibonacci retracement point.