EU CREDIT RATING: Moody's Upgrades several Italian entities:

• RES 4: 5800.00 Round number resistance 
• RES 3: 5777.41 1.382 proj of the Aug 1 - 22 - Sep 2 price swing 
• RES 2: 5727.18 1.236 proj of the Aug 1 - 22 - Sep 2 price swing
• RES 1: 5717.00 High Oct 21       
• PRICE: 5711.00 @ 06:49 BST Oct 27
• SUP 1: 5615.66 20-day EMA  
• SUP 2: 5531.66 50-day EMA  
• SUP 3: 5423.00 Low Sep 25  
• SUP 4: 5366.00 Low Sep 17     

The trend structure in Eurostoxx 50 futures is bullish. The recent breach of 5689.00, the Oct 2 high and bull trigger, confirms a resumption of the uptrend. This maintains the price sequence of higher highs and higher lows and note that moving average studies are in a bull-mode position, highlighting a dominant medium-term uptrend. Sights are on 5727.18, a Fibonacci projection. First support lies at 5601.40, the 20-day EMA.

• RES 4: 107.348 50.0% retracement of Apr 7 - Sep 25 bear leg (cont) 
• RES 3: 107.320 High Oct 17 and the bull trigger 
• RES 2: 107.235 High Oct 22 
• RES 1: 107.175 High Oct 24   
• PRICE: 107.070 @ 06:38 BST Oct 27
• SUP 1: 117.050 Intraday low   
• SUP 2: 107.014 76.4% retracement of the Sep 25 - Oct 17 bull leg    
• SUP 3: 106.995 Low  Oct 8
• SUP 4: 106.965 Low Oct 6 

A short-term bear cycle in Schatz futures remains intact and the contract has traded lower today. For now, the current bear cycle that started Oct 17 is considered corrective and is allowing a recent overbought trend condition to unwind. An extension lower would open 107.014, a Fibonacci retracement, and the next important support. On the upside, initial resistance is at 107.175, Friday’s high.

• Germany will return to the market on Wednesday with E4.5bln of the 10-year 2.60% Aug-35 Bund (ISIN: DE000BU2Z056) on offer.
• On Thursday, Italy will look to hold a 5/10-year BTP / CCTeu auction. Details will be confirmed today. We see a good chance for a new 10-year Feb-36 BTP to be launched at this auction, alongside a first reopening of the 5-year 2.85% Feb-31 BTP (ISIN: IT0005671273). We note that the Apr-34 CCTeu (ISIN: IT0005652828) has been sold at each auction since its May launch.
• Finland will conclude the month’s issuance on Thursday by holding an ORI auction.

NOMINAL FLOWS: This week will see sizeable redemptions of E54.5bln: E27.5bln of a formerly 30-year French OAT and E27.0bln of a formerly 10-year Spanish Obli. Coupon payments for the week total E17.8bln of which E10.1bln are Spanish, E6.5bln French and E1.1bln Italian. This leaves estimated net flows for the week at negative E46.1bln, versus positive E11.4bln last week.