BOBL TECHS: (H6) Corrective Cycle Remains In Play

• RES 4: 1.1779 High Oct 1   
• RES 3: 1.1747 50.0% retracement of the Sep 17 - Nov 5 bear leg
• RES 2: 1.1728 High Oct 17
• RES 1: 1.1694 50.0% retracement of the Sep 17 - Nov 5 bear leg 
• PRICE: 1.1646 @ 06:03 GMT Dec 9
• SUP 1: 1.1605 20-day EMA 
• SUP 2: 1.1547 Low Nov 26
• SUP 3: 1.1491/1469 Low Nov 21
• SUP 4: 1.1469 Low Nov 5 and the bear trigger  

EURUSD continues to trade closer to its recent highs and a bull cycle remains intact for now. The recent breach of key short-term resistance at 1.1656, the Nov 13 high and a bull trigger, highlights a potential reversal and opens 1.1694 next, a Fibonacci retracement. Clearance of this retracement point would strengthen the developing bull theme. Initial support to watch is 1.1605, the 20-day EMA. A breach of the EMA would be bearish.

• RES 4: 129.55 High Nov 26 and key resistance    
• RES 3: 129.24 High Dec 1    
• RES 2: 128.82 20-day EMA 
• RES 1: 128.08/75 High Dec 8 / High Dec 3 and a key resistance            
• PRICE: 127.39 @ 05:40 GMT Dec 9 
• SUP 1: 127.28 Low Dec 8         
• SUP 2: 127.19 2.382 projection of the Nov 12 - 20 - 26 price swing 
• SUP 3: 127.00 Round number support
• SUP 4: 126.81 2.764 projection of the Nov 12 - 20 - 26 price swing

Bund futures remain in a bear-mode cycle following last week’s impulsive sell-off and Monday’s bearish acceleration. The contract has traded through the 128.00 handle, paving the way for an extension towards 127.19 next, a Fibonacci projection. Key short-term resistance is 128.75, the Dec 3 high. Note that the contract has entered oversold territory. A corrective bounce would allow the oversold condition to unwind.

Governor Bullock clarified that a rate cut was not considered or even suggested as an option at the December meeting and that the 2026 discussions are likely to be around whether to leave rates at 3.6% or increase them. The Board is uncomfortable with where inflation is and private demand is now taking over from the public sector and so further easing is not “on the horizon for the foreseeable future”. Rates will continue to be decided on a meeting-by-meeting basis and be driven by the data.

• A rate hike wasn’t explicitly considered in December but the Board discussed what needs to happen for it to occur, which includes quarterly CPIs showing more inflation persistency signalling that there are greater capacity pressures and less restrictive financial conditions. She noted that with growth likely around potential, there isn’t much room to grow without price pressures.
• The Board is now more focussed on inflation. If it stays high, then it will have to do “something”. It is particularly looking at market services, new dwelling and durable goods prices.
• Bullock observed that the market is trying to predict the RBA’s reaction function and is reacting to the data. She said that the market is right that the Board is thinking about upside risks and that it is alert but wants more evidence. She wouldn’t comment on the timing of market priced hikes.
• 6 months ago risks were to the downside, which have abated, but upside ones have been “generated” and therefore there was no consideration to cut. Bullock noted that the Board needs to be flexible as conditions change.