Jan 26, 2018. Unbalanced?

–Early part of Thursday’s session featured new highs in EUR, gold, crude oil.  Euro made its high of 1.2537 during Draghi’s press conference as the market hoped for a stronger response to the strengthening ccy.  The ten year note future made a slight new low.  However, late in the day almost all markets reversed.  A possible catalyst was Trump saying that Mnuchin’s comments welcoming a weak dollar were taken out of context.  Bonds had already based and edged higher after the seven year auction.  ESH broke and January’s trendline was pierced, but ultimately came back and closed nearly unchanged, just above the trendline.  (chart below).   Crude oil and gold closed lower.  The dollar index had a nice bounce.
–Much of what Trump has tweeted/said has been easily absorbed by the markets.  Yesterday’s trade action suggests less stability (regarding the markets of course, not Trump; he will be interviewed on CNBC this morning).  Perhaps some of yesterday’s action is simply the result of position rebalancing as we near the end of the month and many markets have had large moves (worst month for USD in five years).

–In any case, implied vol fell on the bounce in treasuries, with TYH 122.5^ closing at 1’00 (3.6).  5/30 treasury spread came close to posting a new low, ending at 46.8 (45.3 low).  The ten year yield eased 3 bps to 262.  I’ve been bearish, but these formations in rate futures suggest selling pressure has been shut off.  FVH and TYH left double bottoms separated by 2 days.  These lows should now represent strong areas of support.  If the lows are taken out, watch out below. (FVH 115-00/114-31 and TYH 122-01+/121-31).

–Feb treasury options expire today.  CNBC interview with Trump.

–Q4 Advance GDP this morning expected +3.0%.  Durable as well, expected +0.8 and Non  def ex-air expected +0.6.

Posted on January 26, 2018 at 5:11 am by alexmanzara · Permalink
In: Eurodollar Options

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