GBPUSD TECHS: Corrective Bounce
- RES 4: 1.2667 High May 27 and a reversal trigger
- RES 3: 1.2586 50-day EMA
- RES 2: 1.2518 High Jun 10
- RES 1: 1.2405/06 20-day EMA / High Jun 16
- PRICE: 1.2309 @ 06:18 BST Jun 17
- SUP 1: 1.2042 Low Jun 16
- SUP 2: 1.1934 Low Jun 14 and High Mar 20 2020
- SUP 3: 1.1795 0.764 proj of the Mar 23 - May 13 - 27 price swing
- SUP 4: 1.1777 Low Mar 26 2020
GBPUSD rallied sharply higher yesterday and remains above this week’s lows. Gains are considered corrective and the primary trend direction remains down. A resumption of weakness would refocus attention on Tuesday’s low of 1.1934 that also marks the short-term bear trigger. A break would confirm a resumption of the downtrend. Initial firm resistance is seen at 1.2405, the 20-day EMA. Yesterday’s high was 1.2406.
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US TSYS: Twisting A Little Steeper
Some light cash Tsy demand around the Asia-Pac re-open, coupled with a downtick in Chinese equites & e-minis supported Tsys during Asia-Pac dealing, although the space is back from firmest levels of the session ahead of London hours, with e-minis off lows. TYM2 last deals -0-01+ at 118-26, 0-04 off the tip of its 0-09+ overnight range, with volume just above 90K. Cash Tsys have twist steepened, with the major benchmarks running 2bp richer (led by 2s) to 0.5bp cheaper (20s & 30s). Note that the long end lagged the front end in the early rally.
- For some background, Chinese tech stocks faltered after yesterday’s rally, with caution surrounding Tencent’s impending earnings release and some concerns re: the lack of concrete assurances re: lower regulatory burden for the space in the wake of yesterday’s high level Chinese policymaker-tech executive meeting weighing. Headline index moves were relatively modest in the wider scheme of things, with the Hang Seng and CSI 300 trading down a mere 0.6% at typing. Questions surrounding the spread of COVID in the Chinese cities of Beijing, Tianjin & Sichuan still remain evident, even as the situation in Shanghai improves.
- A light, data related bid in the ACGB space provided further support to Tsys half way through Asia trade.
- Chicago Fed President Evans spoke overnight, generally underpinning the broader view of the FOMC. Post-address remarks with reporters saw Evans note that rates may have to go beyond neutral, although such a dynamic makes him nervous. As a result, he highlighted his support for moving to a shallower rate-hike path by September to allow the Fed time to assess inflation dynamics and the impact of already implemented tightening on the labour market.
- Flow was headlined by two block buys of TUM2 futures (+5.5K apiece), which underscored the outperformance of the front end of the Tsy curve.
- Wednesday’s NY session will bring the release of housing starts & building permits data, 20-Year Tsy supply and Fedspeak from Philly Fed President Harker.
EUROZONE: Timeline of key events (Times BST)
| Event | Time | Country | Event |
| 18-May | 1000 | EU | HICP (f) |
| 18-May | ---- | EU | ECB Lagarde & Panetta in G7 Meeting |
| 19-May | 0900 | EU | EZ Current Acc |
| 19-May | 1000 | EU | Construction Production |
| 19-May | 1230 | EU | ECB April meeting Accounts |
| 19-May | ---- | EU | ECB Lagarde & Panetta in G7 Meeting |
| 19-May | 1330 | EU | ECB de Guindos Keynote Address at Harvard |
| 20-May | 0700 | DE | PPI |
| 20-May | ---- | EU | ECB Lagarde & Panetta in G7 Meeting |
| 20-May | 1300 | EU | ECB Lane in Discussion at Stockholm Uni |
| 20-May | 1500 | EU | Consumer Confidence Indicator (p) |
| 23-May | 0900 | DE | IFO Business Climate Index |
| 23-May | ---- | EU | ECB Lagarde & Panetta at Eurogroup Meeting |
| 23-May | 1400 | BE | BNB Business Sentiment |
EURUSD TECHS: Corrective Bounce Extends
- RES 4: 1.0852 High Apr 22
- RES 3: 1.0758 Low Apr 14 and a recent breakout level
- RES 2: 1.0642 High May 5 and key short-term resistance
- RES 1: 1.0580 20-day EMA
- PRICE: 1.0537 @ 06:17 BST May 18
- SUP 1: 1.0429/0350 Low May 17 / Low May 13 and the bear trigger
- SUP 2: 1.0341 Low Jan 3 2017 and a key support
- SUP 3: 1.0333 1.236 proj of the Feb 10 - Mar 7 - 31 price swing
- SUP 4: 1.0296 2.0% 10-dma envelope
EURUSD traded higher Tuesday as the pair extended the corrective bounce from last week’s low of 1.0350. The broader trend direction remains down and a break of 1.0350, May 13 low, would confirm a resumption of the downtrend. Moving average studies remain in a bear mode condition, highlighting current sentiment. The focus is on 1.0341 next, Jan 3 2017 low and key support. Key resistance is unchanged at 1.0642, May 5 high.
