JGBS: 20s Struggle In Wake Of Poorly Received Supply
JGB futures consolidated their overnight losses in Tokyo dealing, with the cash space playing catch up to the post-Tokyo weakness, which was linked to the latest news wire source reports surrounding the potential for a BoJ policy framework review in the post-Kuroda era (that we have documented elsewhere).
- There was a soft reception for the latest round of 20-Year JGB supply, which saw the low price, and indeed the average price, miss wider dealer expectations, with the cover ratio nudging further below the 6-auction average.
- A combination of spill over from the core global FI price action during the Tokyo lunch break and the weak auction details applied pressure to JGB futures in early afternoon trade, although the overnight lows in futures were not tested on the move. 20s cheapened on the curve.
- The space then regained some poise into the close, leaving futures -20 at the bell, while cash JGBs were little changed to 4bp cheaper, with 20s providing the weakest point, both pre- and post-supply.
- In domestic news flow we saw continued rumours surrounding tax tweaks to fund Japan’s increased defence spending, but this was inconsequential for markets, with the broader tax category alterations already highlighted by policymakers.
- Looking ahead, Friday’s local docket will be headlined by flash PMI readings.
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GBPUSD TECHS: Trend Needle Points North
- RES 4: 1.2069 1.00 proj of the Sep 26 - Oct 5 - 12 price swing
- RES 3: 1.2000 Psychological round number
- RES 2: 1.1901 High Aug 26
- RES 1: 1.1872 High Nov 14
- PRICE: 1.1774 @ 06:03 GMT Nov 15
- SUP 1: 1.1472 50-day EMA
- SUP 2: 1.1334/1150 Low Nov 09 / Nov 04 and a bear trigger
- SUP 3: 1.1061 Low Oct 21
- SUP 4: 1.0924 Low Oct 12 and a key short-term support
The GBPUSD outlook remains bullish. The pair has recently cleared resistance at 1.1645, the Oct 27 high, to confirm a resumption of the bull cycle that started Sep 26. This maintains the positive price sequence of higher highs and higher lows and opens 1.1901, the Aug 26 high ahead of the 1.2000 psychological handle. On the downside, initial firm support has been defined at 1.1334, the Nov 9 low.
JGBS: Long End Supported By Soft GDP Data
Cash JGBs run ~1bp cheaper to 3.5bp richer as the curve twist flattens.
- JGB futures added to their modest overnight bid, which was linked to the post-Tokyo move in U.S. Tsys and some Monday richening in the likes of the German FI market, with softer than expected domestic GDP data providing further support.
- That left the contract +17 into the bell, just shy of early session highs.
- The bid in the long end was relatively sticky, also linked to the previously outlined moves in the wider core global space in post-Tokyo Monday trade and the soft domestic data.
- Headlines covering comments from Japanese Economy Minister Nishimura & BoJ Governor Kuroda were not market movers.
- 5-Year JGB supply was fairly non-descript, with average internal metrics observed.
- Looking ahead, Wednesday will see the release of core machine orders data.
EURUSD TECHS: Trading At Its Recent Highs
- RES 4: 1.0615 High Jun 27
- RES 3: 1.0536 High Jun 29
- RES 2: 1.0450 1.764 proj of the Sep 28 - Oct 4 - 13 price swing
- RES 1: 1.0368 High Aug 10
- PRICE: 1.0333 @ 05:57 GMT Nov 15
- SUP 1: 1.0163 Low Nov 11
- SUP 2: 1.0094 High Oct 27 and a key near-term resistance
- SUP 3: 0.9936 Low Nov 10
- SUP 4: 0.9836 Trendline support drawn from the Sep 28 low
EURUSD bullish conditions remain intact and the pair is trading at its recent highs. Recent gains have confirmed a positive price sequence of higher highs and higher lows on the daily chart and moving average studies have crossed to highlight a potential bull mode set-up. Sights are on 1.0368 resistance, the Aug 10 high ahead of 1.0450, a Fibonacci projection. Initial firm support lies at 1.0094, the Oct 27 high.
