USDJPY TECHS: Bullish Trend Condition

EGB yields dipped Tuesday amid mixed global labor market and activity data, but Gilts weakened.

• Slightly weaker-than-expected Eurozone December flash PMIs had little impact on core EGBs. In the UK however Gilts were kept on the back foot amid a firm PMI print and labour market data that showed higher-than-expected earnings growth.
• The delayed US nonfarm payrolls report was initially seen as weak due to a sizeable unemployment rate rise, but the move fully reversed in part due to strong US retail sales alongside, and saw Gilts and Bunds yields hit session highs.
• Yields were content to come off of the lows into the cash close, ahead of Wednesday's UK CPI release and Thursday's ECB / BoE decisions.
• On the day, the German curve bull steepened slightly, with the UK's bear steepening. Periphery/semi-core EGB spreads fell modestly.
• Aside from UK CPI (MNI's preview here), German IFO and Eurozone final November inflation data feature Wednesday.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.6bps at 2.134%, 5-Yr is down 1.7bps at 2.452%, 10-Yr is down 0.8bps at 2.845%, and 30-Yr is down 0.6bps at 3.466%.
• UK: The 2-Yr yield is up 1.2bps at 3.766%, 5-Yr is up 1.3bps at 3.96%, 10-Yr is up 2.2bps at 4.518%, and 30-Yr is up 1.9bps at 5.258%.
• Spanish bond spread down 1.2bps at 43.6bps  / French OAT down 0.4bps at 70.5bps  

• RES 4: 0.8865 High Nov 14 and a bull trigger   
• RES 3: 0.8840 High Nov 20
• RES 2: 0.8818 High Nov 26
• RES 1: 0.8802 High Dec 2 and a key near-term resistance
• PRICE: 0.8796 @ 16:22 GMT Dec 16
• SUP 1: 0.8755/21 50-day EMA / Low Dec 9
• SUP 2: 0.8706 76.4% retracement of the Oct 8 - Nov 14 bull leg
• SUP 3: 0.8670 Low Oct 21   
• SUP 4: 0.8656 Low Oct 8 and a key support  

The current upleg in EURGBP highlights a possible reversal and the end of the corrective phase between Nov 14 - Dec 9. Key short-term support has been defined at 0.8721, the Dec 9 low. A break of this level would signal scope for a deeper retracement, towards 0.8706, a Fibonacci retracement. Initial firm resistance to watch is unchanged at 0.8802, the Dec 2 high. Clearance of this hurdle would be a bullish development.         

In a speech Tuesday (link) largely addressed to developments in payments, cash and digital money/stablecoins, BOC Gov Macklem largely repeats many of the key monetary policy messaging he and Governing Council made last week alongside its rate hold. 

• With words taken nearly exactly from the December meeting statements, he says "the economy is proving resilient overall. Inflationary pressures continue to be contained despite added costs related to the reconfiguration of trade. Total CPI inflation has been close to the 2% target for more than a year now, and we expect it to remain near the target. In the current situation, Governing Council sees the policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment. Uncertainty is of course still very high. If the outlook changes, we are prepared to respond."
• BOC rate pricing was little changed on the session, including post-speech Q&A (which had little in addition to the above), with about 18bp of hikes priced through next October.
• Separately on a more dovish note, MNI's Policy team reported: "Canada's central bank has a case to lower interest rates next year if the economy remains weak, while the hike some investors are betting on won't happen, former deputy Paul Beaudry said Tuesday, speaking during a panel talk for the Bennett Jones law firm."