BONDS: Bunds Move Away From Session Lows Alongside USTs, Gilts Underperform
Bund futures have climbed off session lows alongside UST counterparts, currently -11 ticks at 127.46 (vs lows of 127.08) on solid volumes of over 300k today. The overall technical setup in the contract remains bearish, with initial firm resistance at 127.86, the 20-day EMA. A break of this average would signal the start of a stronger correction.
- Headline flow has been relatively light, save for US President Trump issuing a warning to Iran on the treatment of peaceful protestors.
- Recent cross asset moves have seen European equity futures move away from highs and crude futures bounce a little from session lows.
- The Eurozone December manufacturing PMI was revised down to 48.8 (vs 49.2 flash), following a downward revision in Germany and weaker-than-expected readings in Spain and Italy.
- BTPs underperform EGB peers, with the spread to Bunds up 2bps to ~71.5bps.
- Slovenia has issued a mandate for a new 10-year SLOREP transaction, likely to be held early next week.
- Gilt futures are -22 ticks at 91.15. First support is 90.50, with resistance located at 91.78.
- The 10-year Gilt/Bund spread is 1.5bps wider at ~163bps, with 10-year Gilt yields up 1.5bps and Bund yields little changed. Both the German and UK curves have steepened, alongside Treasuries.
- The UK manufacturing PMI was revised down to 50.6 (vs 51.2 flash).
- The remainder of today's calendar is light, with US manufacturing PMIs due this afternoon.
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EURUSD TECHS: Clears Key Short-Term Resistance
- RES 4: 1.1779 High Oct 1
- RES 3: 1.1747 50.0% retracement of the Sep 17 - Nov 5 bear leg
- RES 2: 1.1728 High Oct 17
- RES 1: 1.1694 50.0% retracement of the Sep 17 - Nov 5 bear leg
- PRICE: 1.1663 @ 10:50 GMT Dec 3
- SUP 1: 1.1584 20-day EMA
- SUP 2: 1.1547 Low Nov 26
- SUP 3: 1.1491/1469 Low Nov 21
- SUP 4: 1.1469 Low Nov 5 and the bear trigger
EURUSD is trading higher and this has resulted in a breach of key short-term resistance at 1.1656, the Nov 13 high and a bull trigger. Clearance of this level highlights a potential reversal and opens 1.1694 next, a Fibonacci retracement. Clearance of this retracement point would strengthen the developing bull theme. Initial support to watch is 1.1584, the 20-day EMA. A break would be bearish.
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FOREX: EURUSD Breaches Bull Trigger At 1.1656
- EURUSD is currently testing above key resistance and the bull trigger at 1.1656 (Nov 13 high). Prediction market odds for a Russia/Ukraine ceasefire by the end of '26 remain around 50%, however, the latest headlines from the Kremlin may be providing some more tepid optimism relating to the peace talks.
- While the Kremlin acknowledged that some things were accepted and others rejected as unacceptable, this is part of a normal working process. The kremlin adds it would be wrong to say that Putin rejected the US plan on Ukraine, they said it was a first exchange of opinions.
- Overall, the risk backdrop remains stable Wednesday, allowing the major indices and crypto markets to edge higher and provide a negative tilt to the US dollar. The greenback tone was also set late last night as President Trump’s nod towards Kevin Hassett potentially becoming the next Fed Chair confirms the dovish bias to market Fed pricing for 2026.
- Of additional importance for EURUSD, the week’s advance cancelled a doji reversal signal from last Thursday, and above 1.1656, the immediate focus turns to 1.1694, a retracement level and 1.1728, the Oct 17 high.
