EGBS: Easing French Political Risks Lends Support To Major EGB Futures
Major EGB futures remain biased to the upside, with yesterday’s easing of near-term French political risks lending support. OAT futures are +32 ticks at 123.01, while Bunds are +17 ticks at 129.85.
- A bull cycle in Bund futures remains intact, with next resistance at 130.05, a Fibonacci retracement point. Note that moving average studies have crossed into a bull-mode position, a bullish signal.
- The German curve is lightly bull flatter, with Schatz yields down 1bp and 10 to 30-year yields down 2bps. 10-year Bund yields are hovering just below the 2.60% figure. A clear break would expose 2.55% as the next downside target.
- Germany will sell E1.0bln of the 0% Aug-50 Bund alongside E1.5bln of the 2.90% Aug-56 Bund this morning,
- 10-year EGB spreads to Bunds are biased up to 1bp wider, with SPGBs and PGBs underperforming.
- Eurozone August industrial production was a little stronger-than-expected at -1.2% M/M (vs -1.6% cons), with last month’s reading also revised up to 0.5% (vs 0.3% initial). There was little market reaction.
- The remainder of today’s regional calendar includes comments from ECB’s Villeroy. He already said yesterday that if the ECB were to move again, a cut is more likely than a hike. This wasn’t surprising, in our view.
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BUNDS: Looking to test the initial resistance
- The German Bund targets the initial small resistance noted at 128.84, not seen a clear new driver, and the move has mostly been gradual throughout the early trading session.
- In terms of flow, volumes are still on the lighter side and the fade off the highs in Equities has put some impetus in the EGB recovery off their respective lows.
- A clear break through 128.84 would open to the 129.13 gap next.
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COMMODITIES: Gold in a Clear Bull Cycle, Close to Recent Record Highs
The trend condition in WTI futures is unchanged - a bear cycle remains intact short-term gains are considered corrective. The pullback from the Sep 2 high highlights a possible recent reversal and the end of a corrective phase between Aug 13 - Sep 2. Initial resistance to watch is $66.03, the Sep 2 high. Key short-term resistance has been defined at $69.36, the Jul 30 high. A stronger resumption of weakness would open $57.71, the May 30 low. Gold remains in a clear bull cycle and continues to trade at its recent highs. The yellow metal traded to a fresh all-time high once again, last week. The break higher confirms a resumption of the primary uptrend and an extension of the sequence of higher highs and higher lows. The next objective is $3674.8, a Fibonacci projection. Initial firm support lies at $3504.1, the 20-day EMA.
- WTI Crude up $0.26 or +0.41% at $62.94
- Natural Gas up $0.02 or +0.82% at $2.964
- Gold spot up $1.54 or +0.04% at $3644.05
- Copper up $0.35 or +0.08% at $465.5
- Silver up $0.02 or +0.05% at $42.199
- Platinum up $3.49 or +0.25% at $1400.63
