US OUTLOOK/OPINION: Unemployment Rate Seen Holding Pullback From Recent High
- The unemployment rate should continue to offer a good gauge of labor market conditions with the caveat that we’ll need to watch for any impact from the aforementioned population control adjustments (which will only affect the rate if there are large differences in new population estimates going towards employed vs unemployed).
- Consensus is heavily centered around a repeat of 4.1% after it surprised lower in December with 4.09%, pulling back from a cycle high of 4.23% in November with technically its lowest rate since June. The median FOMC member in December saw 4.2% in 4Q24 (it almost undershot with an average 4.15%) before 4.3% in 4Q25.
- The participation rate meanwhile is seen holding at 62.5% in January as it consolidates a decline first seen in November following a pullback in prime-age participation.
- Looking at broader trends, labor force growth should continue to slow over time considering the pullback in border encounters since President Biden’s executive order tightening the southern border back in June. This decline, with nationwide borders down an average 53% Y/Y in 2H24 comes before any of President Trump’s deportation pledges take effect.
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US TSYS: Late SOFR/Treasury Option Roundup: 2025 Rate Cut Pricing Evaporating
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
EURJPY TECHS: Trend Structure Still Bullish
- 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.
AUSSIE 10-YEAR TECHS: (H5) Trades Through The December Low
- 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.
