EURUSD TECHS: Clears Resistance
- RES 4: 1.0916 High Jun 04 and the bull trigger
- RES 3: 1.0852 High High Jun 12
- RES 2: 1.0820 61.8% retracement of the Jun 4 - 26 downleg
- RES 1: 1.0817 High Jul 3
- PRICE: 1.0785 @ 05:49 BST Jul 4
- SUP 1: 1.0710/0666 Low Jul 2 / Low Jun 26 and the bear trigger
- SUP 2: 1.0650 Low May 1
- SUP 3: 1.0601 Low Apr 16 and a key support
- SUP 4: 1.0568 Low Nov 2
EURUSD traded higher Wednesday resulting in a break of Monday’s 1.0776 high. Note that price is also through an important resistance at 1.0771, the 50-day EMA. A clear break of this EMA undermines the recent bearish theme and signals scope for a recovery towards 1.0820, 61.8% of the Jun 4 - 26 downleg. For bears, a resumption of weakness would refocus attention on the bear trigger at 1.0666, Jun 26 low.
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BUND TECHS: (M4) Corrective Bounce
- RES 4: 132.89 38.2% retracement of the Dec 27 - Apr 25 bear cycle
- RES 3: 132.55 High Apr 15
- RES 2: 131.03/132.11 50-day EMA / High May 16 and the bull trigger
- RES 1: 130.28 20-day EMA
- PRICE: 129.88 @ 05:31 BST Jun 4
- SUP 1: 128.73 Low May 31
- SUP 2: 128.42 Low Nov 1 ‘23 (cont)
- SUP 3: 128.26 2.00 proj of the Mar 8 - 18 - 27 price swing
- SUP 4: 127.56 Low Oct 26 2023 (cont)
A bear cycle in Bund futures remains in play and last week’s fresh cycle lows reinforce this theme. Short-term gains are considered corrective. The contract has breached the key support and bear trigger at 129.53, the Apr 25 low. The move down confirms a resumption of the downtrend that started late December last year and paves the way for 128.42 next, the Nov 1 ‘23 low (cont). Initial resistance is at 130.28, the 20-day EMA.
BONDS: NZGBS: Richer But Closed Off Best Levels, Terms Of Trade Tomorrow
NZGBs closed 2-7bps richer but well off the session’s best levels. This retreat aligns with the 1-2bps cheapening observed in US tsys during today's Asia-Pacific session.
- In doing so, the NZGB 10-year has underperformed its $-bloc counterparts relative to Friday's close (the NZGB market was closed yesterday), with the NZ-US and NZ-AU 10-year yield differentials 6bps and 1bp wider at +33bps and +43bps respectively.
- A simple regression of the AU-NZ 10-year yield differential versus the AU-NZ 3-month swap rate 1-year forward (1y3m) differential suggests the 10-year differential is close to fair value.
- Swap rates closed 3-5bps lower, with the 2s10s curve flatter.
- RBNZ dated OIS pricing closed 2-5bps softer for meetings beyond October. A cumulative 23bps of easing is priced by year-end.
- Tomorrow, the local calendar will see CoreLogic House Prices, NZ Government 10-Month Financial Statements and Q1 Terms of Trade Index data.
- Tuesday’s US data calendar includes Jolts, Factory and Durable Goods Orders.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.5% May-30 bond, NZ$200mn of the 2% May-32 bond and NZ$50mn of the 2.75% May-51 bond.
OIL: Correction Lower Continues, Brent Close To Oversold Technical Condition
Oil prices continue to trend lower. Front month Brent is off a further 0.8%, building on Monday's near 4% fall. This puts us back towards $77.75/bbl, fresh lows back to early February. Note on Feb 5 we touched $76.62/bbl, beyond that lies lows in early Jan around the $75/bbl level. WTI is off by slightly more, down 0.9%, last under $73.55/bbl.
- There has been little in the way of fresh news flows, as markets continue to digest the prospect of potentially greater OPEC+ supply later in the year (could come from October). This comes amidst an uncertain demand backdrop, with US ISM figures suggesting weaker manufacturing.
- However, a lot could change between now and then and the increased supply may not happen if market conditions don't warrant it (per OPEC+).
- For Brent, the front month contract is not too far off oversold conditions based off the RSI (14), which we have spent very little time under in recent years.
