EM LATAM CREDIT: Argentina: S&P Upgrade - Positive

• In the FI space, a bear theme in Bund futures remains intact and the contract is trading closer to its recent lows. Price has pierced 128.52, the 76.4% retracement of the Sep 25 - Oct 17 bull leg. A clear break of this handle would signal scope for an extension towards 128.25, the Oct 7 low. Key short-term resistance is seen at 129.40, last Thursday’s high. Clearance of this hurdle would signal a reversal.
• The latest sharp pullback in Gilt futures is considered corrective - for now - and the next key support to watch lies at 91.82, the Sep 11 high and a former key breakout level. Moving average studies remain in a bull-mode position, highlighting a dominant uptrend. First resistance to watch is 92.85, the Nov 14 high. For bears, a break of 91.82, the Sep 11 high, would strengthen a bear theme and open 91.67, a 50.0% retracement of the Sep 3 - Nov 4 bull leg.

SFIZ5 96.20/96.25/96.30c fly, bought for 1 in 6.5k (ref 96.245) vs selling SFIZ5 96.25/96.35/96.45/96.55c condor at 2 in 6.5k.

• Despite the sharp volatility for the Nasdaq and gold in recent sessions, both pulling back ~5%, the USD index has remained in a relatively contained range, finding solid support at 99.00, but unable to make meaningful moves back toward the recovery highs. Market impact has been more distinct among higher-beta FX, likely reflective of valuation-driven positioning in the AI and tech sectors.
• Market participants are also likely trying to assess whether the plethora of incoming US data, and in particular any surprises in Thursday’s NFP report, might be viewed through a policy or growth lens. With that said, the short-term DXY uptrend remains intact having been well supported by the 50-day EMA since early October.
• This average intersects at 98.93, of which a close below would be a bearish development for the greenback. Topside focus remains on the layered resistance between 100.25-48, significant for a more meaningful dollar recovery.
• Goldman Sachs thinks the US growth story will be more prevalent, and note EM, AUD, and JPY should be among the biggest movers on Thursday. They believe their preferred EM carry longs (including BRL, ZAR) should be relatively insulated to payrolls outcomes when funded out of CAD.
• ING’s base case remains that risks are tilted to the downside for the dollar once the US data cycle kicks in, and they expect a December Fed cut to become the market’s base case again. Similarly, Danske Bank believe there are greater downside risks for the USD. They note if the capital rotation out of US assets continues and a sharp US recession hits, EUR/USD could break substantially higher than their current 12 month forecast of 1.22 suggests.