COMMODITIES: Bullish Theme in Gold Remains Intact

WTI futures traded to a fresh S/T cycle high last Wednesday before finding resistance. The recovery since Apr 9, appears corrective. Key resistance to watch is $62.71, the 50-day EMA. It has been pierced, a clear break of it would highlight a stronger reversal and open $65.82, Apr 4 high. For bears a reversal lower would refocus attention on $54.33, the Apr 9 low and bear trigger. The May 21 price pattern is a shooting star - a reversal signal. Gold has recovered from its recent lows. The climb signals the end of the corrective phase between Apr 22 - May 15. Medium-term trend signals are unchanged, they remain bullish. Note that moving average studies are in a bull-mode position highlighting a dominant uptrend. A continuation higher would open $3435.6 next, the May 7 high. Key support and the bear trigger has been defined at $3121.0, the May 15 low.

• WTI Crude up $0.42 or +0.68% at $61.96
• Natural Gas down $0.02 or -0.6% at $3.313
• Gold spot down $22.78 or -0.68% at $3334.7
• Copper up $1.5 or +0.31% at $485
• Silver down $0.01 or -0.03% at $33.4544
• Platinum down $5.19 or -0.47% at $1091.32

A bullish theme in Eurostoxx 50 futures remains intact and the recent pullback appears corrective. Moving average studies are in a bull-mode position, highlighting a clear uptrend and recent gains maintain the sequence of higher highs and higher lows. Sights are on 5516.00, the Mar 3 high and the key bull trigger. Key support to watch lies at 5223.87, the 50-day EMA. Clearance of this average would signal a possible reversal. A bullish trend condition in S&P E-Minis remains intact and the latest pullback is considered corrective. Last Friday’s sell-off resulted in a print below the 20-day EMA, at 5779.53. A key support lies at 5719.58, the 50-day EMA. A clear break of this average is required to highlight a stronger reversal and signal scope for a deeper retracement. Sights are on the bull trigger at 5993.50, the May 20 high.

• Japan's NIKKEI closed higher by 371.06 pts or +1% at 37531.53 and the TOPIX ended 16.39 pts higher or +0.6% at 2751.91.
• Elsewhere, in China the SHANGHAI closed lower by 1.533 pts or -0.05% at 3346.839 and the HANG SENG ended 318.93 pts lower or -1.35% at 23282.33.
• Dow Jones mini up 466 pts or +1.12% at 42141, S&P 500 mini up 72.5 pts or +1.25% at 5889.75, NASDAQ mini up 293.25 pts or +1.4% at 21269.

The 10-year BTP/ Bund spread is biased slightly narrower at 101.5bps today, with the EU/US 50% tariff delay and Moody’s ratings decision after hours Friday supporting light outperformance versus Bunds.

•  We have previously noted that meaningful (positive) progress on EU/US trade negotiations may be needed for the spread to sustainably trade below 100bps, and this reasoning still holds with the current backdrop.
• However, the tail risks for the spread have now changed, with the worst-case scenario of no US/EU trade deal now considerably more detrimental to the near-term Eurozone and Italian economic outlook than a week ago.
• The spread knee-jerked to a high of 104bps following US President Trump’s initial 50% tariff announcement, but had tightened back below 102bps by the time of Friday’s close.
• Meanwhile, Moody’s choice to move Italy to a positive ratings outlook (rating affirmed at Baa3) was BTP-supportive, but not a large surprise to markets. Moody’s rating on Italy is still one notch below Fitch and two notches below S&P
• Some highlights from Moody’s report:
  • “The 2024 fiscal outturn was better than we and the government had expected”…” Domestic political stability increases the likelihood that the government will continue to narrow the deficits and achieve growing primary surpluses”.
  • “The positive outlook is also supported by a robust labour market, sound household and corporate balance sheets and a healthy banking sector. Further expected improvements in the net international investment position are likely to support economic resilience and reduce Italy's susceptibility to event risk”.
  • “The affirmation captures Italy's high debt burden which coupled with a gradual weakening debt affordability and structural challenges related to population ageing remains a constraint on its credit profile”.