JGBS: Market Cheapens After 30Y Auction, BoJ Takada Signals Hike Pause

• RES 4: 1.1625 1.500 proj of the Feb 28 - Mar 18 - Mar 27 price swing
• RES 3: 1.1608 High Nov 9 2021
• RES 2: 1.1573 High Apr 21 and the bull trigger
• RES 1: 1.1455 Intraday high 
• PRICE: 1.1423 @ 06:10 BST Jun 3
• SUP 1: 1.1307 20-day EMA
• SUP 2: 1.1182/1.1065 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

A bullish theme in EURUSD remains intact and Monday’s gains and fresh short-term cycle high reinforce current conditions. The breach of  1.1419, the May 26 high, confirms a resumption of the trend and opens 1.1573, the Apr 21 high and bull trigger. Support to watch lies at 1.1182, the 50-day EMA. A clear break of this average would undermine the bull theme and signal scope for a deeper retracement. This would open 1.1065, the May 12 low.

JGB futures are stronger, +10 compared to settlement levels, after gapping higher following a strong 10-year auction. 

• The 10-year JGB auction delivered a low price above expectations, according to the Bloomberg dealer poll. Moreover, the cover ratio increased to 3.6627x from 2.5440x, and the tail shortened to 0.01, the shortest since March 2023, from 0.18.
• BoJ Governor Ueda, speaking in parliament, emphasised that trade uncertainties remain extremely high and are unlikely to ease even after tariff issues are resolved. He noted that the BoJ's baseline economic scenario could change significantly due to external conditions.
• He also said the BoJ will review its bond tapering plans at the next policy meeting on June 17, taking into account feedback from bond market participants.
• Note as well Governor Ueda will speak later today at 4:50pm local time.
• Cash US tsys are ~1bp richer in today's Asia-Pac session after yesterday's sell-off.
• Cash JGBs are 1bp cheaper to 2bps richer across benchmarks, with the belly leading. The benchmark 10-year yield is 2.3bps lower on the day at 1.490%.
• Swap rates are flat to 1bp lower.
• Tomorrow, the local calendar will see Jibun Bank Composite and Services PMIs.

• RES 4: 132.56 High Feb 28 and a key resistance               
• RES 3: 132.03 High Apr 7 and the bull trigger     
• RES 2: 131.72 High May 7 
• RES 1: 131.44 High May 30                       
• PRICE: 131.35 @ 05:46 BST Jun 3
• SUP 1: 130.39 May 29 low              
• SUP 2: 129.49/13 Low May 22 / 15 and key short-term support
• SUP 3: 129.02 Low Apr 10 
• SUP 4: 128.60 Low Apr 9 and a key support

A bullish theme in Bund futures remains intact and the contract is trading at its recent highs. The latest recovery suggests the move down between Apr 22 - May 15, has been a correction. A continuation higher would strengthen the reversal and signal scope for a climb towards 132.03, the Apr 7 high. Key short-term support to watch is 129.13, the May 15 low. First support lies at 130.39, the May 29 low.