AUSSIE BONDS: ACGB Mar-36 Auction Result

After rising 0.8% to $3886.54/oz on Friday after a peak of $3891.74, which was below Thursday’s new record of $3896.85, gold has jumped in Monday’s APAC trading to a new high of $3920.62, above round number support at $3900. It is currently around $3909 despite a stronger greenback (BBDXY +0.3%). It continues to be supported by the ongoing US government shutdown with no near-term resolution apparent and the uncertainty it creates around the economy as it weighs on activity but also delays key data releases. 

• Gold fell to $3838.16 during Friday’s APAC session but then trended higher and finished the week up 3.4%. Its uptrend continues with moving average studies in bull mode. It has breached both $3900 and $3909.4 resistance levels today.
• With US government-produced data on hold, private releases will be scrutinised. Friday’s October preliminary University of Michigan consumer confidence is likely to be this week’s focus.
• Silver rose 2.1% to $48.00 to be up 4.2% on the week. It trended higher through Friday to a peak of $48.374, above resistance levels at $48.052 and $48.232. It has started today around $48.25.
• The US dollar was slightly softer on Friday with the BBDXY down 0.1% but Treasury yields higher. Equities were little changed with the S&P flat and Euro stoxx up 0.1%. The S&P e-mini is currently up 0.3%. Oil prices were higher with Brent +0.4% to $64.36/bbl. Copper rose 2.7%.

• RES 3: 140.08 High Jun 13  
• RES 2: 139.05 High Aug 4 
• RES 1: 137.30 - High Sep 8 and key short-term resistance
• PRICE: 135.86 @ 15:51 BST Oct 03
• SUP 1: 135.67 - Low Sep 26 
• SUP 2: 135.39 - 1.618 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.)
• SUP 3: 134.69 - 2.000 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.)  

A bear threat in JGB futures remains present and the contract has pulled back from its recent highs. The latest sell-off has also resulted in a break of support at 136.19, the Sep 4 low and a bear trigger. Clearance of this level confirms a resumption of the downtrend and opens 135.39 next, a Fibonacci projection. Key short-term resistance has been defined at 137.30, the Sep 8 high.  

Dec JGB futures ended Friday trade at 135.88, -.03 versus settlement levels. Focus will be on downside risks in Monday trade, in the aftermath of Takaichi's surprise LDP leadership victory from Saturday. Levels to be mindful of from a technical standpoint. SUP 1: 135.67 - Low Sep 26, SUP 2: 135.39 - 1.618 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.) SUP 3: 134.69 - 2.000 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.). 

• Given market odds, per Polymarket, on Friday were giving little chance to a Takaichi victory, early trends are likely to be skewed towards higher JGB yields, particularly towards the back end of the curve, leading to a steeper bias.
• The 10yr yield JGB finished up Friday trade at 1.66%, just off cycle highs above 1.67%. The 2/10s curve was at +72bps, sub recent highs. A steeper bias is likely today, with +80bps, the July highs a potential upside focus point. For the 2/30s curve we closed Friday at +222bps, with recent highs above +240bps.
• Making fresh highs from a yield curve standpoint may not happen in the near term, as Takaichi won't be sworn in until the middle of the month and initial focus will be on forming her cabinet.
• Her stance appeared to soften somewhat as the leadership campaign unfolded, she is expected to focus on cash handouts and tax rebates for households to reduce cost of living pressures. Via BBG: "While saying her spending plans will be "responsible" and that she'll ensure the nation's net debt load will fall over time, she said "the goal is achieving economic growth, not fiscal health." She also noted during the campaign that extra JGB issuance could be needed.
• Hence key policy initiatives and alliances with minority parties will be in focus. Many opposition//minor parties favor lowering the sales tax to provide cost of living relief, but per BBG: "In line with many in the LDP, she remains cautious on the idea of opposition demands to lower the sales tax, one of the costliest options for dealing with the cost-of-living crunch."