EU TRANSPORTATION: Air France-KLM: confirms SLB step

Euribor futures are little changed through the blues today, but there are some interesting technical setups to be aware of at the front of the strip. Downward sloping trendlines drawn from the mid-April highs continue to cap upside in the white/front-red futures. Additionally, the U5/U6 spread remains contained by a falling wedge pattern, with the upper trendline drawn from the March 6 high still in close proximity (see chart).

• ECB-dated OIS are little changed through the next 12 months. One more 25bp cut remains essentially fully priced this cycle.
• This morning, Dutch June flash inflation was in line with the 5-analyst strong 2.8% Y/Y consensus. Some analysts have flagged downside risks to current tracking for a 2.0% Y/Y Eurozone-wide headline reading at 1000BST. Core is still seen tracking around 2.3% Y/Y.
• We’ve already had a lot of ECB-speak this morning (Nagel, Simkus, Wunsch, Lane, de Guindos). None have been too market moving for STIRs, but Wunsch did suggest the risks to rates are to the downside (he is usually considered a cautious/hawkish-leaning Governing Council member).
• Interestingly, de Guindos also noted that a EURUSD gain beyond 1.20 could be "complicated". This is a dovish signal, with a stronger EUR likely to exert downward pressure on import prices. Note that EURCNH reached its highest level in a decade overnight.
• On the tariff front, Bloomberg reported that the EU is willing to accept a 10% baseline US tariff, but is still pushing for concessions on sector-specific levies. Chief Economist Lane re-iterated that a 10% tariff is already in the ECB’s baseline projection.
• June manufacturing PMIs are due this morning (final reads for France, Germany and Eurozone), alongside the ECB’s consumer expectations survey. 

Figure 1: Euribor U5/U6 Spread (Bloomberg Finance L.P)

• RES 4: 0.6700 76.4% retracement of the Sep 30 ‘24 - Apr 9 bear leg
• RES 3: 0.6688 High Nov 7 ‘24
• RES 2: 0.6603 High Nov 11 ‘24
• RES 1: 0.6584 Intraday high
• PRICE: 0.6577 @ 08:02 BST Jul 1 
• SUP 1: 0.6500 20-day EMA
• SUP 2: 0.6453/6373 50-day EMA / Low Jun 23 and a reversal trigger     
• SUP 3: 0.6357 Low May 12
• SUP 4: 0.6275 Low Apr 14

The medium-term trend set-up in AUDUSD remains bullish and Monday’s gains strengthen current conditions. The break higher marks a resumption of the uptrend and maintains the bullish price sequence of higher highs and higher lows. Sights are on 0.6603 next, the Nov 11 2024 high. Key short-term support has been defined at 0.6373, the Jun 23 low. A pullback would be considered corrective.

• RES 4: 171.28 1.382 proj of the Feb 28 - Mar 18 - Apr 7 price swing
• RES 3: 171.09 High Jul 23 ‘24  
• RES 2: 170.47 76.4% Fibonacci retracement for Jul - Aug ‘24 downleg
• RES 1: 169.91 1.236 proj of the Feb 28 - Mar 18 - Apr 7 price swing
• PRICE: 169.31 @ 07:53 BST Jul 1 
• SUP 1: 168.56 Low Jun 26 
• SUP 2: 167.21 20-day EMA 
• SUP 3: 165.91 Low Jun 16   
• SUP 4: 165.14 50-day EMA   

The trend set-up in EURJPY is unchanged, it remains bullish and the cross is trading just below its latest highs. Recent gains resulted in a break of 166.69, the Oct 31 ‘24 high. Scope is seen for a climb towards 170.47, a key Fibonacci retracement point. Note that the uptrend is in overbought territory, a pullback would unwind this condition. Support to watch lies at 166.94, the 20-day EMA. A break of it would suggest potential for a deeper retracement.