AUSSIE BONDS: Back From Early Cheaps
Aussie bonds sit a little above best levels, having unwound the bulk of their earlier losses (derived from the overnight cheapening in Aussie bond futures) throughout the Sydney session, aided by a similar move higher in Tsys.
- Cash ACGBs run 1.5bp cheaper to 2.0bp richer across the curve, twist flattening, and pivoting around 5s.
- YM is -0.5 and XM is +0.5, with both contracts operating a little below their respective overnight peaks. EFPs are little changed, while Bills run 4 ticks cheaper to 4 ticks richer through the reds.
- Little by way of a meaningful reaction was observed in ACGBs on the release of the AOFM’s weekly issuance slate. Next week will see a smaller A$800mn of ACGBs and A$1.5bn of Notes on offer (as well as A$100mn in indexed bonds), compared to A$1.1bn in ACGBS and A$2.0bn of Notes previously announced for this week.
- No economic data releases of note are scheduled for Monday.
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EUROSTOXX50 TECHS: (U2) Trend Needle Still Points North
- RES 4: 3902.00 High Mar 29 and a key resistance
- RES 3: 3855.00 High Apr 21
- RES 2: 3840.00 High Jun 6 and key resistance
- RES 1: 3811.00 High Jun 8
- PRICE: 3709.00 @ 05:47 BST Aug 10
- SUP 1: 3658.00 Low Aug 2
- SUP 2: 3607.80/3553.00 50-day EMA / Low Jul 26
- SUP 3: 3467.00 Low Jul 18 / 19
- SUP 4: 3343.00 Low Jul 5 and the bear trigger
EUROSTOXX 50 futures trend conditions remain bullish and yesterday’s pullback is considered corrective. Price has recently cleared the 76.4% retracement of the Jun 6 - Jul 5 downleg, at 3722.40. The breach opens 3811.00 next, the Jun 8 high, ahead of 3840.00, the Jun 6 high. Key support and the bear trigger is unchanged at 3343.00, the Jul 5 low. Initial firm support to watch is 3607.80, the 50-day EMA.
US TSYS: CPI Keeps Asia Sidelined
TYU2 operated within the confines of a narrow 0-05 range overnight, last +0-01+ at 119-17, on sub-standard volume of ~40K, with the proximity to the impending CPI print keeping most sidelined. Cash Tsys run 1.0bp richer to 1.5bp cheaper across the curve, pivoting around 3s.
- A Chinese white paper reiterating the country’s stance on Taiwan, which also failed to take the prospect of military action against the island off the table, provided the major point of interest in Asia.
- A downtick for the Hang Seng, which trades ~2% weaker at typing, may have provided incremental support.
- A $190K DV01 block buy in TU futures (+5K) has also helped underpin the front of the curve.
- Note that we published a podcast interview with St. Louis Fed President Bullard late on Tuesday, with Bullard stressing that the Fed will be prepared to hold interest rates "higher for longer" should inflation continue to surprise to the upside, and market pricing will need to adjust accordingly. He also noted that when it comes to terminal rates “I think the destination is a little bit higher than what I would have thought even a couple months ago because inflation has continued to broaden out and doesn't look like it's turning the corner at least based on the evidence we have today.”
- When questioned on the prospect of an inter-meeting rate hike Bullard told us that Jackson Hole falls in the current inter-meeting period, "the Chair could use that if he thinks it's appropriate to signal changes in monetary policy."
- CPI data presents the focal point on Wednesday, with the German and Eurozone (final) readings due before the U.S. equivalent (see our full preview of that data release here: https://marketnews.com/mni-us-cpi-preview-buckle-up). Elsewhere, real average earnings data & 10-Year Tsy supply are due in NY hours, while Fedspeak will come from Evans & Kashkari.
SCHATZ TECHS: (U2) Watching Support
- RES 4: 110.855 High Apr 4 (cont)
- RES 3: 110.500 High May 26 (cont)
- RES 2: 110.412 1.50 proj of the May 16 - 24 - 28 price swing
- RES 1: 110.100/380 High Aug 3 / Aug 2 and the bull trigger
- PRICE: 109.785 @ 05:36 BST Aug 10
- SUP 1: 109.670 Low Jul 28
- SUP 2: 109.604 50-day EMA
- SUP 3: 109.350 Low Jul 22
- SUP 4: 108.950 Low Jul 21 and a key support
Schatz futures are unchanged and remain below recent highs. The recent move lower is likely a correction and trend conditions still appear bullish. Fresh highs on Aug 2, confirmed a resumption of the uptrend and maintains the bullish price sequence of higher highs and higher lows. The focus is on 110.412 next, a Fibonacci projection. Key support is unchanged at 108.950, the Jul 21 low. Initial firm support is seen at 109.670.
