BONDS: EGBs-GILTS CASH CLOSE: Bull Flatter
Gilts outperformed Bunds in a bull flattening move across European curves Tuesday.
- European bonds fluctuated overnight, with competing moves as US President Trump opined on tariff imposition. Supply weighed on EGBs, with France and Lithuania conducting syndications (France's 15Y OAT seeing record order books >E134B). For their part. Gilts saw limited pressure on a Jan-40 Gilt syndication.
- After weakening for most of the European morning session, global FI saw a recovery in the afternoon triggered by a slightly softer than expected Canada CPI report.
- European data was largely shrugged off: UK labour market figures were mixed (soft quantity readings vs. firmer-than-expected private wages). German ZEW expectations fell by more than expected.
- The German and UK curves bull flattened. Periphery EGB spreads to Bunds closed slightly tighter, with semi-core French OATs outperforming on the aforementioned well-received syndication.
- Wednesday's calendar is highlighted by ECB speakers including Lagarde, with data including UK public finances.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 0.7bps at 2.215%, 5-Yr is down 1bps at 2.318%, 10-Yr is down 1.6bps at 2.51%, and 30-Yr is down 2.8bps at 2.731%.
- UK: The 2-Yr yield is down 4.3bps at 4.334%, 5-Yr is down 5.1bps at 4.337%, 10-Yr is down 6.9bps at 4.59%, and 30-Yr is down 5.9bps at 5.151%.
- Italian BTP spread down 1.2bps at 108.1bps / French OAT down 1.2bps at 77bps
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TRUDEAU SAYS `WE HAVE A LOT OF WORK TO DO'
- TRUDEAU SAYS `WE HAVE A LOT OF WORK TO DO'
- TRUDEAU WANTS GOVT TO PREPARE FOR NEW US ADMINISTRATION
- TRUDEAU DOESN'T ADDRESS QUESTIONS ABOUT HIS LEADERSHIP
USDCAD TECHS: A Pullback Would Be Considered Corrective
- RES 4: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 3: 1.4537 2.0% 10-dma envelope
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4356 @ 16:56 GMT Dec 20
- SUP 1: 1.4301 Low Dec 18
- SUP 2: 1.4174/4014 20- and 50-day EMA values
- SUP 3: 1.3928 Low Nov 25 and a key support
- SUP 4: 1.3822 Low Nov 6
USDCAD bulls remain in the driver’s seat. While price faded into the Thursday close, the recent breach of 1.4178, the Nov 26 high, confirmed a resumption of the uptrend and this maintains the price sequence of higher highs and higher lows. The latest rally opens 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4174, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Bearish Trend Structure
- RES 4: 0.6550 High Nov 25
- RES 3: 0.6501 50-day EMA
- RES 2: 0.6429 High Dec 12
- RES 1: 0.6337/6396 Low Dec 11 / 20-day EMA
- PRICE: 0.6263 @ 16:55 GMT Dec 20
- SUP 1: 0.6199 Low Dec 19
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
The trend needle in AUDUSD continues to point south and this week’s fresh cycle lows and Wednesday’s sell-off, reinforce a bear theme. The move down maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. The break lower opens 0.6158 next, a Fibonacci projection. Initial firm resistance to watch is 0.6396, the 20-day EMA.
