US TSYS: Extending Late Session Lows
- After some massive Block/buying in 5s (20k at 108-25.75) and 10s (+50k 111-28) buoyed rates in late morning trade - futures are back to extending lows last few minutes, more flow driven amid a lack of obvious headline triggers.
- TYH6 trades 111-23.5 (-15.5) low vs. 112-07.5 overnight. After breaching technical support at 111-29 (Dec 10 low and bear trigger) earlier - the next support level is 111-19, a Fibonacci projection: 1.236 proj of the Oct 17 - Nov 5 - 25 price swing.
- Below that, keep an eye on 111-11, 1.382 proj of the Oct 17 - Nov 5 - 25 price swing.
- Curves mixed: 2s10s +2.711 at 62.821, 5s30s -1.579 at 101.076.
- Projected rate cut pricing vs. late Thursday levels (*): Jan'26 at -0.7bp (-1.2bp), Mar'26 at -5.3bp (-5.6bp), Apr'26 at -8.9bp (-9.2bp), Jun'26 at -19.8bp (-20.8bp).
- Cross asset roundup: Bbg US$ index +.55 at 1212.23, stocks near flat (SPX eminis +6.75 at 6988.50), Gold weaker (-33.45 at 4582.70).
- Look ahead to next week - slow start in US with Monday holiday closure, ADP Weekly NER Pulse and Philadelphia Fed Non-Manufacturing Activity expected Tuesday.
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EURGBP TECHS: Remains Above Support
- RES 4: 0.8865 High Nov 14 and a bull trigger
- RES 3: 0.8840 High Nov 20
- RES 2: 0.8818 High Nov 26
- RES 1: 0.8802 High Dec 2 and a key near-term resistance
- PRICE: 0.8775 @ 16:31 GMT Dec 17
- SUP 1: 0.8721 Low Dec 9
- SUP 2: 0.8706 76.4% retracement of the Oct 8 - Nov 14 bull leg
- SUP 3: 0.8670 Low Oct 21
- SUP 4: 0.8656 Low Oct 8 and a key support
The bull cycle in EURGBP that started on Dec 9 highlights a possible reversal of the corrective phase between Nov 14 - Dec 9. Key short-term support has been defined at 0.8721, the Dec 9 low. A break of this level would signal scope for a deeper retracement, towards 0.8706, a Fibonacci retracement. Initial firm resistance to watch is unchanged at 0.8802, the Dec 2 high. Clearance of this hurdle would be a bullish development.
ECB: Macro Since Last ECB - Inflation: Firmer Services Helped By Package Hols
- The ECB has received a reasonable amount of new information on HICP inflation since its last meeting although it’s unlikely to have materially altered its outlook.
- Headline HICP inflation has modestly cooled since September (from 2.24% Y/Y to 2.10% in Oct and 2.14% in today’s final November data) whilst core has firmed slightly (from 2.35% to 2.37% in Oct and 2.41% in Nov). Headline was trimmed very slightly from 2.16% in the flash release whilst core was completely unchanged at 2.41%.
- Further within the details, services inflation accelerated to 3.47% Y/Y in November from 3.24% in September for its fastest since April, a little higher than consensus but mostly outweighed by core goods inflation undershooting at 0.55% Y/Y.
- The final November report confirmed as generally expected that package holidays had played a role in the further services acceleration, jumping from 0.91% to 4.42% Y/Y in November. Other travel-related categories were more mixed, with accommodation firming from 3.14% to 3.41% but airfares swinging from 1.66% in Oct to -2.74% in Nov (national level data were unclear on the extent to which this reversed).
- As for more recent 3M/3M trend rates, core inflation momentum was 2.35% annualised in November, a pullback from 2.62% in October to leave it unchanged from the 2.35% the ECB had seen for September ahead of the last meeting (a figure that currently shows as 2.31% in the latest vintage). Services momentum has firmed on net though, at 3.36% in Nov after 3.59% in Oct and 2.89% in Sept.
GBPUSD TECHS: Bull Cycle Remains Intact For Now
- RES 4: 1.3527 High Oct 1
- RES 3: 1.3471 High Oct 17
- RES 2: 1.3456 High Dec 16
- RES 1: 1.3452 61.8% retracement of the Sep 17 - Nov 4 bear leg
- PRICE: 1.3404 @ 16:23 GMT Dec 17
- SUP 1: 1.3312 Low Dec 17
- SUP 2: 1.3290 50-day EMA
- SUP 3: 1.3180 Low Dec 2
- SUP 4: 1.3125 Low Nov 26
A bull cycle in GBPUSD remains intact and for now, Wednesday’s sell-off is considered corrective. A fresh cycle high on Tuesday reinforces the bull theme. Attention is on 1.3452 (pierced), 61.8% of the Sep 17 - Nov 4 bear leg. A clear break of this hurdle would strengthen a bull theme and open 1.3527, the Oct 1 high. Initial firm support is 1.3290, the 50-day EMA. A breach of this EMA would highlight a possible reversal.
