JGBS: Futures Steady But Still Eyeing Aug Lows, Tokyo CPI, BoJ Speech Next Week

• Gold has broken higher today and above recent ranges.  
• Despite oil up over 1% - which of late has seen gold lower on inflation / rate concerns - gold's 'safe haven bid' has won out today as the war in Iran escalates.  
• Bullion is up +1.26% to US$4,128 and back above the 20-day EMA for the first time since early May.  
• Above lies the 50-day EMA at $4,236 - which gold has not tested since April.  
• Looking ahead, there is some macro data out of the US, but it is unlikely to be a game changer for US rate assumptions, until the July 29 Federal Reserve rate decision.
• Gold would likely need to break above $4,200 for this to be a decisive change in momentum as ST indicators for now remain relatively neutral.
• US bond yields reaction to the spike in oil today has been modest.  Watch UST yields for the guidance on oil's next move.  US rate hike expectations have continued to edge higher and further escalation of the conflict could weigh heavy on yields. 

The BBDXY has had a range today of 1218.99 - 1220.02 in the Asia-Pac session; it is currently trading around 1219. The USD has found demand back toward the 1215 area and is looking to push back above 1220 as US yields extended higher overnight. Risk though is starting to see green shoots emerge hinting at a potential upswing to come but this move in US yields is taking precedence for the moment. I suspect only one of those trades will prove correct, the USD’s direction will be closely correlated to which emerges the stronger. While the support toward 1205-1210 area continues to hold, the bulls technically still remain in control. I remain skewed toward fading a dip, though it looks like we might have to do some work and a range trade in the short-term is most likely. 

• WSJ via BBG - Israel Believes Iran Moved Nuclear Centrifuges Into Pickaxe Mountain. https://blinks.bloomberg.com/news/stories/TIJ9D9PV4WE8
• Ben Hunt on X: “It's the one question you should always ask yourself ...Why am I reading this now?”
• Ben makes a valid point as Trump and the Media lay the groundwork for an attack. Is Nuclear an option ? What does that mean for risk ? 
• EUR/USD -  Asian range 1.1397-1.1410, Asia is currently trading 1.1405. The pair is drifting back to the lower end of its recent range. On the day, the pair continues to chop around sideways in a 1.1380-1.1480 range. I remain skewed in favour of fading rallies with the first resistance toward 1.1420-1.1450 and then the more pivotal 1.1500-1.1550 area, looking for the pair to turn lower again at some point. A sustained push back below the 1.1380 area is needed to try and reassert the downward momentum. 
• GBP/USD - Asian range 1.3370-1.3390, Asia is currently dealing around 1.3380. The pair has made a complete reversal from the 1.3550 highs putting in an ugly bearish shadow on the Daily chart to end last week. On the day, the bears look to be back in control and I suspect sellers reemerge back toward 1.3425-1.3455 looking for the move lower to regain momentum. 
• Data: UK June CPI, US MBA mortgage applications

Fig 1: GBP/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

• China bonds are seeing a modest rally today with yields down around -0.5bps.  
• The 10-Yr edged lower to 1.73% as the demand dynamic for bonds remains strong given the reopening of the 10-Yr due May 15, 2036.  
• Expectations are high for this reopening following the most recent 10-year benchmark government bond auction hit a massive, all-time record bid-to-cover ratio of 7.23.
• 10-Yr bond futures are up +.05 today at 109.225 to move back above the 20-day EMA of 109.14.  
• Looking ahead there is a further 10-Yr reopening scheduled for Friday alongside a 5-Yr CNY130bn auction.