Thread by @options_insight

0/ Next week’s FOMC meeting seems to be on set path to our first rate hike despite talks of slowing growth and headwinds from Russia/Ukraine - get caught up on how FX, bonds, and rates are shaping up this week 🧵👇

1/ Reversal in DXY from just shy of 100 on big "risk on" move with hopes of a Diplomatic solution in Ukraine. Was very overbought and at top of a channel in place since last April.

2/ EUR rallies hard from key long term support zone 1.03-1.08. If this gets broken then opens way to 0.85. EU Defence bonds will likely provide support as people flock to hold new high quality non-US bonds, increasing EUR reserves. European recession odds rising.

3/ In rates markets, banks stockpiling liquidity, 2s10s continues to flatten, could be inverted by the end of March! Inflation breakevens shot higher on commodity prices and hike probabilities for this year barely moving showing that FED is handcuffed.

4/ 10Y bond yield head back up towards 2.00% after flight to safety bid fades away on bear market squeeze. Treasury auction was disappointing with high yield, poor bid to cover and foreign buyers down significantly from 77.6% to 68.2%.

5/ Totally agree with my boy @42macroDDale on the FED, no dovish pivot... "we can see the data is very much signalling stickier inflation and could give more credence to the Fed staying committed to their tightening path." #BEHINDTHECURVE!

6/ @biancoresearch points out that the yield curve has almost inverted (which is typical after a rate hiking cycle) but we haven't even had our first rate hike. How many hikes before "something breaks"?

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