Spain and France are both due to hold auctions this morning while Germany, Croatia and Austria have already come to the market this week. We pencil in estimated gross issuance for the week at E36.4bln, up from E26.3bln last week but without the large redemptions and coupons.
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The current corrective bear cycle in EURJPY remains in play and this highlights potential for an extension lower. The cross has recently traded below the 20- and 50-day EMAs - a bearish development. A break of 158.08, Feb 1 low, would resume bearish pressure and open 157.21, Jan 9 low. For bulls, a stronger reversal would refocus attention on 161.86, the Jan 19 high and bull trigger. A break of this level would reinstate the recent bullish theme.
Spain, Belgium, the ESM, the EU and Italy are still due to sell bills this week, while Germany, the Netherlands, and France came to the market yesterday. We expect issuance to be E29.3bln in first round operations, up from E15.1bln last week.
BTP futures remain below last week’s high of 119.27 on Jan 30. The contract has recently traded above the 20-day EMA and pierced the Jan 12 high of 119.23. A clear break above 119.23 would highlight a base and a potential resumption of the primary uptrend. For now, attention is on key support at 116.98, the Jan 25 low. Clearance of this level would confirm a resumption of the recent bearish cycle and open 115.70, the Dec 8 low.