EURJPY TECHS: Bull Cycle Remains In Play

• RES 4: 98.25 High May
• RES 3: 98.12 High May 17
• RES 2: 97.44 High May 23 and a key near-term hurdle
• RES 1: 97.23 High Jun 3
• PRICE: 97.06 @ Close Jun 3
• SUP 1: 96.26/95.33 Low Jun 3 / Low May 29 and the bear trigger
• SUP 2: 95.17 2.382 proj of the May 16 - 20- 21 price swing
• SUP 3: 95.02 2.50 proj of the May 16 - 20- 21 price swing
• SUP 4: 94.87 2.618 proj of the May 16 - 20- 21 price swing

Gilt futures have recovered from last week’s low of 95.33 (May 29). For now, the move higher is considered corrective. Last week’s impulsive sell-off resulted in a break of support around 95.87, the May 1 low. The clear break strengthens a bearish theme and signals scope for an extension towards 95.17 next, a Fibonacci projection. Initial firm resistance to watch is 97.44, the May 23 high.

Austria, Germany, Spain and France all look to hold auctions in the upcoming week, with Germany likely to hold a syndication today. We pencil in estimated gross issuance for the week at E33.8bln, down from E40.4bln last week, with net flows at positive E30.4bln. We think that it is unlikely that we see any syndications in this week, given the ECB meeting.

• Germany released a mandate for a syndication on Monday for a E3bln WNG tap of the 1.80% Aug-53 Green Bund (ISIN: DE0001030757). We had thought the syndication schedule would slow down this week ahead of the ECB meeting this week. However, we had also noted that there was still one more German green syndication to come this year. We expect the transaction to take place today.
• Austria will look to kick off auctions for the week this morning. On offer will be a shared E2.013bln of the 3.45% Oct-30 RAGB (ISIN: AT0000A38239) and the 2.90% Feb-34 RAGB (ISIN: AT0000A39UW5)
• Germany will also come to the market today to hold a E4.5bln auction of the 2.90% Jun-26 Schatz (ISIN: DE000BU22056).
• Belgium closed books for its latest retail -only State Bond (Bons d’État) subscription on Monday 3 June (they had been open since Friday 24 May). The total amount sold will be announced today, with takeup through the first six days (up to Friday 31 May) very low, only E202mln for the 1-year 3.20% Jun-25 issue (ISIN: BE3871296260) and E4.6mln for the 8-year 2.80% Jun-32 issue (ISIN: BE3871297276).
  • Last year the 1-year State Bond E21.9bln takeup reduced both OLO and in particular TC funding through H2-24. With another very low takeup, it is now looking extremely unlikely the E13.5bln contribution for this instrument in the BDA’s 2024 funding plan will be reached. This is most likely to mean either higher TC issuance will be required and may even require higher OLO issuance.

EZ240604.pdf