EM LATAM CREDIT: Latin America High and Ultra Beta Sovereign Bond Commentary
Both Argentina and Ecuador bonds continued to perform well WoW, following through with spectacular news in both cases that drove massive outperformance MTD. The lifting of almost all capital controls in Argentina was a risky strategy by the government that seemed to go well so far judging from the ARS performance but way too early to declare victory. In El Salvador the doomsday scenario of a Correa protege winning the election was averted in favor of the market friendly incumbent but who is left with the daunting challenges of improving security and restoring economic health. In a case of a rising tide lifts all ships, Bolivia managed to tighten 114 bps, or 2 points higher in price, since getting downgraded from Caa3 to Ca by Moody's on April 17th.
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OPTIONS: US Options Roundup - Mar 26
Wednesday's U.S. rates options flow included:
- SFRZ5 95.62/95.37ps, bought for 1.75 in 60k total (pit and screen)
- SFRM5 95.50p, bought for half in 20k
EURGBP TECHS: Finds Support
- RES 4: 0.8494 High Aug 26 ‘24
- RES 3: 0.8474 High Jan 20 and a key resistance
- RES 2: 0.8428/8450 High Mar 18 / 11 and the bull trigger
- RES 1: 0.8395 High Mar 24
- PRICE: 0.8365 @ 16:47 GMT Mar 26
- SUP 1: 0.8333 Low Mar 26
- SUP 2: 0.8321 61.8% retracement of the Mar 3 - 11 bull leg
- SUP 3: 0.8391 76.4% retracement of the Mar 3 - 11 bull leg
- SUP 4: 0.8241 Low Mar 3 and a key support
EURGBP has traded lower before a mid-session rally. Wednesday’s strength off the intraday low highlights a possible reversal. A strong daily close Wednesday would strengthen the bullish significance of today’s bounce. Note that MA studies are in a bull-mode position. This suggests that the pullback from the Mar 11 high, has been a correction. Resistance to watch is 0.8395, the Mar 24 high. Key near-term support lies at 0.8333, today’s intraday low.
COMMODITIES: Crude Climbs, Copper Extends Gains Amid Tariff Threat
- Crude prices are trading higher today amid signs of rising tensions in the Middle East. Supply-side risks remain from increased US sanctions against Iran and tariff threats for countries importing Venezuelan oil.
- WTI May 25 is up by 1% at $69.7/bbl.
- Despite recent gains, a bearish trend condition in WTI futures remains intact. However, a key pivot resistance at $69.14, the 50-day EMA, has been pierced. A clear breach of this hurdle would strengthen a bullish theme and open $70.98, the Feb 25 high.
- For bears, a reversal lower would expose the bear trigger at $64.85, the Mar 5 low.
- Meanwhile, copper has risen further today amid reports that US tariffs on copper imports could be coming earlier than expected, within the next several weeks.
- Copper is currently up by 0.5% at $523/lb, having reached a record high at $537 earlier in the session.
- While copper prices are technically overbought, history shows they can tolerate extended periods of stronger prices for a longer duration than the current rally.
- From a technical perspective, a bull cycle in copper futures remains in play, with price testing resistance at $537.30, the 2.5 projection of the Jan 2 - 17 - Feb 3 price swing earlier. A break of this level would open round number resistance at $540 next.
- Spot gold is unchanged today at $3,019/oz, as the yellow metal consolidates below last week’s record high at $3,057.
- A clear uptrend in gold remains intact, with sights on $3,079.2 next, a Fibonacci projection.
