JGBS: Little Changed, Subdued Session Despite Tokyo Core CPI Miss

• RES 4: 1.1625 1.500 proj of the Feb 28 - Mar 18 - 27 price swing
• RES 3: 1.1608 High Nov 9 2021
• RES 2: 1.1573 High Apr 21 and the bull trigger
• RES 1: 1.1453 76.4% retracement of the Apr 21 - May 12 bear leg    
• PRICE: 1.1303 @ 06:13 BST May 28
• SUP 1: 1.1277 20-day EMA 
• SUP 2: 1.1151/1.1065 50-day EMA and a pivot level / Low May 12
• SUP 3: 1.1026 38.2% retracement of the Feb 3 - Apr 21 bull cycle   
• SUP 4: 1.0943 Low Apr 10

Trend conditions in EURUSD are bullish and MA studies are in a bull mode position, highlighting a dominant uptrend. The latest pullback is corrective. The Apr 21 - May 12 bear leg also appears to have been a correction. A resumption of gains would open 1.1453, a Fibonacci retracement. Key support is 1.1151, the 50-day EMA. A clear break of the average would highlight a stronger reversal and signal scope for a deeper retracement.

JGB futures are sharply weaker and at Tokyo session lows, -68 compared to settlement levels, after today’s 40-year auction displayed poor demand metrics.

• Demand for today’s 40-year bond issuance was notably weak, with the high yield clearing well above dealer expectations. According to a Bloomberg survey, the market anticipated a yield of 3.085%, while the actual result came in at 3.135%.
• The auction’s cover ratio declined sharply to 2.2114x, down from 2.9203x at the previous issuance and marking the weakest demand since July 2024.
• Given the combination of elevated yield and weak demand metrics, today’s result is likely to be regarded as very poor. In afternoon trading, the 40-year yield is dealing 8bps higher versus pre-auction levels.
• Cash US tsys have modestly bear-steepened in today's Asia-Pac session, with yields flat  to 3bps higher.
• Cash JGBs are 2-8bps cheaper, with a steeper curve.
• The swaps curve has bear-steepened, with rates 3-8bps higher. Swap spreads are wider.
• Tomorrow, the local calendar will see International Investment Flow and Consumer Confidence data alongside BoJ Rinban Operations covering 3-25-year JGBs.

The BBDXY has had a range of 1215.25 - 1219.21 in the Asia-Pac session, it is currently trading around 1218. “The Fed’s John Williams said policymakers should focus on anchoring not just long-term price expectations, but “the whole curve” to prevent inflation from becoming persistent or permanent”(BBG). “The ECB’s Philip Lane said inflation will hover around 2% for the rest of the year. The impact of US tariffs on medium-term price pressures will determine monetary policy, he told the FAZ.”(BBG)

• EUR/USD -  Asian range 1.1301 - 1.1345, Asia is currently trading 1.1305. EUR has drifted lower for most of the Asian session. It is worth noting that we are heading into the corporate month-end and this could see some USD demand over the next day or 2. Dips back to 1.1200 are expected to be supported.
• GBP/USD - Asian range 1.3473 - 1.3522, Asia is currently dealing around 1.3470. The GBP is struggling to hold above the pivotal 1.3500 area for now, looking for support to return back towards the 13300/3400 area which could be seen if the corporate USD demand materializes. 
• USD/CNH - Asian range 7.1868 - 7.1993, the USD/CNY fix printed 7.1894. Asia is currently dealing around 7.1950. Sellers should be found on a bounce back towards the 7.2200 area again. Andreas Steno Larsen on X : The elephant in the room. USDCNH needs to go to 6.80 at least. https://x.com/AndreasSteno/status/1926115935200440525
• Cross asset : SPX -0.10%, Gold $3297, US 10-Year 4.47%, BBDXY 1218, Crude oil $61.19

• Data/Events : Fra GDP & PPI, Ger Unemployment, ECB CPI Expectations

  Fig 1: GBP/USD Spot Daily Chart

  

  Source: MNI - Market News/Bloomberg