CREDIT PRE-MARKET: EUR Market Wrap

• RES 4: 94.32 20-day EMA  
• RES 3: 93.64 High Dec 17  
• RES 2: 93.38 High Dec 18 
• RES 1: 93.09 High Dec 21              
• PRICE: 92.93 @ Close Dec 20
• SUP 1: 91.87 Low Dec 19                        
• SUP 2: 91.73 4.236 proj of the Dec 3 - 4 - 5 minor price swing
• SUP 3: 91.58 4.382 proj of the Dec 3 - 4 - 5 minor price swing
• SUP 4: 91.45 4.500 proj of the Dec 3 - 4 - 5 minor price swing

A strong bearish theme in Gilt futures remains in play and last week’s extension reinforces current conditions. The move down has resulted in a breach of key short-term support at 93.40, the Nov 18 low. The break of this level highlights a stronger reversal. Sights are on 91.73, a 4.236 projection of the Dec 3 - 4 - 5 minor price swing. Initial firm resistance is at 93.64, the Dec 17 high. Short-term gains are considered corrective.

• The final estimate of Q3 GDP on a quarterly and annual basis is due, the first estimate came in at 0.1%, a tenth below the BOE's forecast of 0.2% Q/Q growth (following 0.5% growth in Q2).
• The monthly readings for July, August and September (released alongside the first quarterly estimate) were 0.0%M/M, 0.2%M/M and -0.1%M/M. They were not open to revision alongside the release of October's first estimate (which came in at +0.1%M/M).
• The BOE has downgraded its forecast for Q4 GDP to flat growth (vs 0.3% forecast in November MPC meeting). Alongside the October monthly print, the PMI data points to a further weakening in GDP with the December flash composite PMI down 2.1 points compared to September PMI (albeit remaining marginally above the 50 level threshold).
• For the balance of payments, the focus will be on the current account deficit which is forecast at GBP23.0bln in Q3 according to the Bloomberg consensus, following a deficit of GBP28.4bln in Q2 - the largest quarterly deficit since Q1 2022. Analyst estimates range from GBP19.2bln to GBP26.0bln.
• From the monthly GDP publication on 13 December, absent any revisions net trade recorded a deficit of GBP10.6bln (vs a deficit of GBP15.9bln in Q2).
• Both the Primary and Secondary Accounts are expected to continue to contribute negatively to the current account. These subcomponents combined point to another current account deficit although an improvement to Q2 where net trade deteriorated to the worse levels seen since Q2 2022.

• RES 4: 166.10 High Nov 6   
• RES 3: 165.04 High Nov 15 and a key short-term resistance 
• RES 2: 164.21 76.4% retracement of the Oct 31 - Dec 3 bear leg  
• RES 1: 163.80 High Dec 19
• PRICE: 162.83 @ 16:54 GMT Dec 23
• SUP 1: 160.83/159.82 20-day EMA / Low Dec 18  
• SUP 2: 158.67/157.87 Low Dec 11 / 09
• SUP 3: 156.18 Low Dec 03 and the bear trigger
• SUP 4: 155.15 Low Sep 16 and a key support

Last Thursday’s strong gains in EURJPY reinforce the current bullish condition. The cross has traded through Tuesday’s 162.48 high, to confirm a resumption of the recovery that started on Dec 3. A continuation higher would signal scope for an extension towards 164.21, the 76.4% retracement of the Oct 31 - Dec 3 bear leg. Key short-term support has been defined at 159.82, the Dec 18 low. A break of this level is required to signal a possible reversal.