SWEDEN: Finance Minister: Autumn Budget Likely To Be Expansive

• In the FI space, Bund futures are trading higher today. The climb has resulted in a test of resistance around the 50-day EMA, at 131.21. A clear break of the EMA would undermine the recent bear theme and highlight a possible reversal. This would open 130.76 initially, the Jul 4 high. Clearance of this level would strengthen a bullish theme. Key support and the bear trigger has been defined at 129.08, the Jul 14 low.
• Gilt futures are also trading higher, however, for now, a bear cycle remains in play and last week’s bearish activity reinforces this theme. The contract has recently breached support at 91.63, the Jul 2 low. Price has also traded through 91.50, the 61.8% retracement of the May 22 - Jul 1 bull leg. The move down exposes 90.97, the 76.4% retracement point. Initial firm resistance is at 91.99, the 20-day EMA.

• USDJPY (-0.77%) has extended session lows in recent minutes, edging below 147.70 as markets continue to convey a sense of cautious optimism following Japan’s upper house election. It has been well pointed out that the positive yen reaction reflects an avoidance of the potential worst-case scenario of an immediate PM resignation, exacerbated by short-term positioning dynamics given the yen is the weakest performing G10 currency this month vs. the dollar.
• We would also note that several analysts continue to stand by their forecasts for a lower USDJPY across the second half of this year, believing the recent yen weakness could provide an attractive entry point for longs. We highlighted some of these views here: https://mni.marketnews.com/4nXOc0n
• While PM Ishiba has declared he aims to find negotiation paths with other political forces and that he is not considering ending his term, political uncertainty will likely remain high given a political vacuum for legislation has been created. This could reinforce recent weakness in JGBs as doubts remain regarding the fiscal trajectory, which may provide a choppy path ahead for JPY.
• Initial support for USDJPY is located at 146.92 (Jul 16 low), while key short-term support is seen at 145.78, the 50-day EMA. Should the pair reverse, the gap between today’s highs and last Friday’s close will be an obvious S-T focus between 148.66 and 148.83.

Euro Stoxx 50 futures trade lower, with the hawkish reports surrounding U.S.-EU trade relations and Stellantis earnings providing a couple of sources of pressure.

• The contract trades at the lowest levels seen in 3 sessions, initial support at Wednesday’s low (5,303.00).