FOREX: FX OPTION EXPIRY

Gilts follow peers away from Friday’s late lows, curve flattening.

• Little in the way of concrete drivers apparent (similar to much of Friday’s bear steepening, with ongoing focus on fiscal/issuance outlooks and Dutch pension reform noted back then).
• More broadly, there wasn’t much in the way of concrete process at the Trump-Putin summit, with Trump set to meet with his Ukrainian counterpart later today.
• Futures as high as 91.23 after trading 90.91 on Friday.
• Still, bears remain in technical control. Fresh extension lower would target the May 29 low (90.59).
• Conversely, bulls need to clear the 50-day EMA (92.05). Clearance of this average is required to highlight a potential reversal.
• Yields 2.5-3.5bp lower.
• The early June high in 10-Year yields (3.702%) remains intact.
• A reminder that 50s registered a fresh cycle high on Friday, but bears failed to force a test of 5.00%.
• 2s10s hovers around 75bp, failing to test July highs around the 80bp mark.
• 5s30s registered a fresh cycle closing high on Friday, printing the highest level seen since ’17 and exposing the 150bp level (last 146.6bp).
• Light dovish moves in GBP STIRs since the pre-gilt open bullet.
• SONIA futures flat to +2.0 on the day.
• Wednesday’s CPI data headlines the domestic calendar this week, see our morning STIR bullet for more colour on that front and expect our usual detailed preview in due course.
• BoE-dated OIS prices 14bp of easing through December and 24.5bp of cuts through February.

• RES 4: $41.064 - 1.764 proj of the Apr 7 - 25 - May 15 swing
• RES 3: $40.285 - 1.618 proj of the Apr 7 - 25 - May 15 swing
• RES 2: $40.000 - Psychological round number
• RES 1: $39.655 - 1.500 proj of the Apr 7 - 25 - May 15 swing    
• PRICE: $38.081 @ 08:38 BST Aug 18
• SUP 1: $36.216 - Low Jul 31 
• SUP 2: $35.285 - Low Jun 24
• SUP 3: $33.940 - 50.0% retracement of the Apr 7 - Jul 23 bull leg  
• SUP 4: $32.958 - Low Jun 2

Trend signals in Silver remain bullish. The pullback off the late July highs is considered corrective - particularly as prices have recovered off support at the 50-day EMA, now at $37.038. A clear break of it is needed to strengthen a short-term bearish threat and allow for a deeper retracement. This would open $35.285, the Jun 24 low. For bulls, a resumption of gains would refocus attention on the next objective at $39.655 a Fibonacci projection.

• RES 4: $3547.9 - 1.764 proj of the Feb 28 - Apr 3 - Apr 7 price swing
• RES 3: $3500.1 - High Apr 22 and bull trigger
• RES 2: $3451.3 - High Jun 16  
• RES 1: $3409.2/3439.0 - High Aug 8 / 23             
• PRICE: $3351.1 @ 08:33 BST Aug 18
• SUP 1: $3268.2 - Low Jul 30 
• SUP 2: $3248.7 - Low Jun 30 and the bear trigger
• SUP 3: $3204.7 - Low May 20
• SUP 4: $3121.0 - Low May 15 and key support 

A bull cycle in Gold remains intact and this is highlighted by moving average studies that remain in a bull-mode position. This sideways trend that has been in place since the Apr peak appears to be a corrective phase. A resumption of gains would open $3439.0, the Aug 23 high. Key resistance and the bull trigger is at $3500.1, the Apr 22 low. On the downside, first support to watch lies at $3268.2, the Jul 30 low.