GBPUSD TECHS: Fresh Cycle High
- RES 4: 1.2759 61.8% of the Jun 1 ‘21 - Sep 26 ‘22 downtrend
- RES 3: 1.2733 2.0% 10-dma envelope
- RES 2: 1.2667 High May 27 2022
- RES 1: 1.2614 Intraday high
- PRICE: 1.2566 @ 16:31 BST May 4
- SUP 1: 1.2461 20-day EMA
- SUP 2: 1.2436 Low May 2
- SUP 3: 1.2353/45 Low Apr 17 / 10
- SUP 4: 1.2347 50-day EMA
The trend outlook in GBPUSD remains bullish and a fresh cycle high today reinforces current conditions. The pair has traded through 1.2599, the Jun 7 2022 high and this signals scope for 1.2667, the May 27 high from last year. A bullish price sequence of higher highs and higher lows remains intact and moving average studies are in a bull mode position. Support to watch is at the 20-day EMA, which intersects at 1.2461.
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RBNZ: VIEW: BNZ: 50 Point Bombshell
BNZ write “taking all things into account we reluctantly, forecast that the RBNZ will raise the cash rate a further 25 basis points at its May 24 MPS taking the cash rate to its final resting place of 5.5%. We say reluctantly because we think the Bank has already done more than enough. Our fear is that if the RBNZ sticks dogmatically to focussing more on the actual data than the leading indicators that it might continue to surprise on the upside.”
BONDS: NZGBS: Weaker Led by 2-Year As RBNZ Surprises
The NZGB cash curve had twist flattened 18bp by the close with the 2-year benchmark yield 12bp higher and the 10-year 6bp lower after the RBNZ surprised the market with a 50bp rate hike. The 10-year benchmark yield had spiked 12bp higher on the decision but quickly recouped those losses. At the close, the cash 2/10 curve was -69bp, the most inverted since 2009.
- The 2s10s swap curve closed 12bp flatter at -94bp, a new low for this cycle and the most inverted since 2008.
- RBNZ dated OIS shunted firmer with pricing +18-24bp across meetings with 20bp of tightening priced for May. Terminal OCR expectations increased 21bp to 5.49%.
- The market pricing and BBG consensus had been expecting a stepped-down 25bp increase today after the 50bp hike in February. The bank had considered both a 25bp and a 50bp hike at today’s meeting but believed that a larger tightening was needed to return inflation to its 1-3% target band.
- The RBNZ revised up its estimates of the inflationary impact of the cyclone rebuild and noted upside risks to the fiscal outlook.
- Further afield, the global calendar is relatively light today with the highlights being European PMIs and German Factory Orders ahead of US ISM Services.
BOBL TECHS: (M3) Support Appears Exposed
- RES 4: 121.000 Round number resistance
- RES 3: 120.610 High Mar 20 and the bull trigger
- RES 2: 119.170/120.130 High Mar 27 / 24
- RES 1: 118.640 High Mar 30
- PRICE: 118.370 @ 05:22 BST Apr 5
- SUP 1: 117.200 Low Mar 31
- SUP 2: 116.982 61.8% retracement of the Mar 6 - 20 rally
- SUP 3: 116.370 Low Mar 15
- SUP 4: 116.125 76.4% retracement of the Mar 6 - 20 rally
Bobl futures have recovered from recent lows. Despite the bounce, the contract maintains a softer tone. Price has recently traded below support at the 20-day EMA - at 117.859. Additionally, support at 117.300, the Mar 22 low, has been pierced. A clear break of this level would strengthen bearish conditions and open 116.982, a Fibonacci retracement. On the upside, initial resistance is seen at 118.640, the Mar 30 high.
