EURGBP TECHS: Bull Flag

• RES 4: 150.49 High Apr 2   
• RES 3: 149.28 High Apr 3
• RES 2: 147.67/148.65 High May 14 / 12 and a reversal trigger
• RES 1: 145.18/146.28 50-day EMA / High May 29 and key resistance   
• PRICE: 144.44 @ 06:47 BST Jun 9
• SUP 1: 142.12 Low May 27 and a key support
• SUP 2: 141.96 76.4% retracement of the Apr 22 - May 12 bull leg
• SUP 3: 139.89 Low Apr 22 and a bear trigger 
• SUP 4: 138.82 1.50 proj of the Feb 12 - Mar 11 - 28 price swing 

Recent gains in USDJPY are considered corrective and the trend condition remains bearish. Attention is on the next important support at 142.12, the May 27 low. A clear break of this level would confirm a resumption of the bear leg and open 139.89, the Apr 22 low. Moving average studies remain in a clear bear-mode position too, highlighting a dominant downtrend. Key short-term resistance has been defined at 146.28, the May 29 high.

The ESM has issued an RFP for a syndicated transaction while the Netherlands, Germany, Finland, Portugal and Italy will look to hold auctions this week. We pencil in estimated gross issuance for the week of E21.7bln (from E47.2bln last week).

For the full MNI Issuance, Redemption and Cash Flow Matrix click here.

• The ESM has sent an RfP for an upcoming transaction. We expect a syndication tomorrow with a size of between E1-3bln. We don’t have a strong conviction surrounding the maturity that will be on offer.
• The Netherlands will kick auctions for the week off tomorrow with E2.0-2.5bln of the on-the-run 10-year 2.50% Jul-35 DSL ISIN (NL0015002F72) on offer.
• Germany will also come to the market tomorrow, looking to sell E4bln of the 2.40% Apr-30 Bobl ISIN (DE000BU25042).
• Finland will round off auctions tomorrow with up to a combined E1.5bln of the 1.50% Sep-32 RFGB (ISIN: FI4000523238) and the 0.50% Apr-43 RFGB (ISIN: FI4000517677).
• Germany will return to the market on Wednesday with E3bln of the 10-year 2.50% Feb-35 Bund (ISIN: DE000BU2Z049) on offer.
• Portugal will look to hold an auction on Wednesday, with a combined E1.00-1.25bln of the 0.90% Oct-35 OT (ISIN: PTOTENOE0034) and the 3.625% Jun-54 OT (ISIN: PTOTE3OE0025) being on offer.
• Italy will conclude the week’s auction issuance on Thursday with a 3/7/15+ year BTP auction. We expect to see reopenings of the 3-year on-the-run 2.65% Jun-28 BTP (ISIN: IT0005641029) and the 7-year on-the-run 3.25% Jul-32 BTP (ISIN: IT0005647265). We don’t have a strong conviction surrounding which 15+ year BTP will be on offer alongside these. Details will be confirmed on Monday.

NOMINAL FLOWS: This week sees a single E17.5bln German Schatz redemption. Coupon payments for the week total E0.8bln of which E0.5bln are German and E0.2bln are Slovakian. This leaves estimated net flows for the week at a positive E3.3bln, versus E2.8bln this week.

• RES 4: 0.8557 High Apr 28  
• RES 3: 0.8541 High May 2 
• RES 2: 0.8493 High May 9  
• RES 1: 0.8440/59 50-day EMA and key resistance / High May 21 
• PRICE: 0.8424 @ 06:41 BST Jun 9 
• SUP 1: 0.8356 Low May 29 and the bear trigger 
• SUP 2: 0.8327 1.382 proj of the Apr 11 - 16 - 21 price swing
• SUP 3: 0.8316 Low Mar 28 and a key support
• SUP 4: 0.8277 1.618 proj of the Apr 11 - 16 - 21 price swing

EURGBP is unchanged and a bear cycle remains in play. A key short-term resistance to watch is 0.8440, the 50-day EMA. It has been pierced, however, a clear break of it is required to highlight a stronger reversal. This would expose 0.8541. For bears, support to watch lies at 0.8356, the May 29 low. Clearance of this level would resume the downtrend and open 0.8316, the Mar 28 low and a key support.