JGBS: Bear Trend Still Intact For Futures, Focus On Fiscal/Issuance Outlook

• RES 3: 95.982 - 76.4% retracement Sep’24 - Nov’24 downleg
• RES 2: 95.960 - High Apr 7 (cont.)
• RES 1: 95.900 - High Oct 17
• PRICE: 95.545 @ 16:08 GMT Nov 21
• SUP 1: 95.485 - Low Nov 20  
• SUP 2: 95.415/95.300 - Low May 15 / Low Jan 14 
• SUP 3: 95.275 - Low Nov 14  (cont) and a key support

Aussie 10-yr futures slipped lower again mid-week on the back of hotter-than-expected jobs data, compounding the impact of the inflation data earlier in the month. The sustainability of the pullback will be dependent on prices holding above key short-term support at 95.510, the Sep 3 low. Near-term resistance remains 95.780, the Sep 12 high. A clear break of this level signals scope for a continuation higher and opens 95.960, the 76.4% retracement level for the Sep’24 - Nov’24 downleg. 

USD/CNH spot tracks near 7.1065/70 in early Monday dealings, after a 0.17% gain on Friday. This brings USD/CNH downside risks back into play, although dips under 7.1000 have been supported back to mid Sep in the pair. Broader USD indices consolidated around recent highs, although USD/JPY saw a pullback, which may have helped CNH at the margins. Spot USD/CNH finished up at 7.1052, while the CNY CFETS basket tracker rose to 98.22, up a further 0.11% to fresh highs since April. 

• USD gains stalled as NY Fed President Williams saw scope for further near term easing, which saw market pricing for a Dec cut firm. US-CH yield differentials have rolled back over, the 2yr spread last back to +206bps, which is still above Oct lows (near +190bps).
• The CNH/JPY cross pulled back as yen gained close to 0.70% for Friday's session (as the intervention threat stepped up, while lower US yields also helped). We saw the pair get under 22.00, but we track slightly above this level in early Monday dealings, with an uptrend still intact (the 20-day EMA support point is around 21.75). Recent highs rest close to 22.19.
• Friday saw a better session for the Golden Dragon index in US trade, up 1.23%, but we were still down for last week. The CSI 300 slipped to 4453.6, off 3.77% last week.
• On the data calendar, we have Oct industrial profits out on Thursday, in an otherwise quiet data week. 

Gold range traded last week and finished the week down 0.5% with a 0.3% drop on Friday to $4065.52. It fell to a low of $4022.65 but then recovered to $4101.16 boosted by comments from NY Fed’s Williams in favour of a December rate cut due to the labour market. The probability priced in for an easing on 10 December rose over the second half of last week from around 37% to 75% on Friday but the October minutes showed a material differing in FOMC views. The US dollar was down slightly and 2-year yield lower. 

• Last week bullion traded between $3998.08 and $4132.86 holding above the 50-day EMA at $3948.2 and below the short-term bull trigger at $4245.23.
• After September payrolls showed stronger-than-expected job growth, Friday’s data showed a slight rise in the preliminary November S&P composite PMI to 54.8 and higher final November Uni of Michigan consumer sentiment with lower inflation expectations.
• Given the delay in releases from the US government shutdown, attention will be firmly on the data that comes out ahead of the next Fed meeting.
• Talks took place over the weekend between the US, Ukraine and Europe, the Europeans have said the plan still needs a lot of work, and are scheduled to continue on Monday. There remain significant geopolitical risks around these developments with Europe, Canada and Japan voicing worries that Ukraine would have to give up too much.
• Concerns that the US deal, which favours Russia, was inflexible have been calmed with President Trump saying that it was not final and President Zelenskyy posting there are “signals that President Trump’s team hears us”.