MNI: UK FEB GFK CONSUMER CONFIDENCE INDEX -38

• RES 3: 151.13 - High Mar 3
• RES 2: 149.75/150.81 - High Nov 11 / High Aug 5
• RES 1: 147.74/148.79 Low Jan 23 / High Nov 16
• PRICE: 147.37 @ 15:32 GMT Jan 24
• SUP 1: 144.15 - Low Jan 13
• SUP 2: 144.02 - 2.0% Lower Bollinger Band
• SUP 3: 143.88 - 1.0% 10-dma envelope

JGBs resumed the week to add to the recent bounce, extending the gains posted into last week’s close on the back of the unchanged BoJ rate decision. The rally puts prices well above recent lows, although the overarching downtrend remains intact for now. First resistance sits at 148.79, the Nov 16 high. Vol band support remains below at 144.02 and 143.88 below.

JGB futures added 2 ticks overnight, oscillating around unchanged levels, generally tracking momentum in the major core global FI markets, albeit with a lower beta.

• Local headline flow has been limited since the Tokyo close, which will leave the continued post-BoJ position reshuffles and the latest round of BoJ Rinban operations (covering 1- to 25-Year JGBs) at the fore. The local data docket is headlined by the leading and coincident index prints.

NZD/USD strength post the Q4 CPI has proven to be short lived. The pair is back to the 0.6480 level, off a little over 0.30% versus NY closing levels. We did get to 0.6525 immediately post the CPI print. Kiwi sentiment is being weighed on, as the market contemplates the RBNZ outlook amidst signs of peaking inflation pressures. The reaction has been noticeable in terms of NZ-US swap spreads, with the 2yr down around 15bps so far today, see the chart below.

• NZD/USD hasn't been that well correlated with spreads this year, with the weaker USD trend and better equity tone dominating, but this chart suggests a less supportive rates backdrop for NZD.
• From a technical standpoint, recent ranges have been respected with support coming in below $0.6480 today. If bears sustain a break through $0.6480 they can target Mondays low at $0.6438. Bulls look to break $0.6530 to regain the momentum.

Fig 1: NZD/USD Versus NZ-US 2yr Swap Spread

Source: MNI - Market News/Bloomberg