COPPER TECHS: (N5) Bear Threat Still Present
- RES 4: $541.50 - High Mar 26 and a key resistance
- RES 3: $521.30 - High Mar 28
- RES 2: $509.85 - 76.4% retracement of the Mar 26 - Apr 7 bear leg
- RES 1: $498.25 - High Apr 23 and a key short-term resistance
- PRICE: $466.80 @ 14:16 BST May 23
- SUP 1: $447.75 - Low May 9
- SUP 2: $436.00/407.40 - Low Apr 10 / 7 and the bear trigger
- SUP 3: $400.00 - Psychological round number
- SUP 4: $392.10 - Low Aug 7 ‘24 low (cont) and a key support
Copper futures are trading in a range. The metal sold off sharply on Apr 30, undermining the recent bullish theme. This suggests that the rally between Apr 7 - 23 has been a correction. Key S/T resistance has been defined at $498.25, the Apr 23 high. A resumption of weakness would expose $436.00, the Apr 10 low, ahead of $407.40, the Apr 7 low and key support. On the upside, a break of $498.25 is required to reinstate a bullish theme.
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EQUITIES: US Cash Opening calls
SPX: 5,430.5 (+2.7%); DJIA: 40,010 (+2.1%/+823pts); NDX: 18,862.3 (+3.2%).
US TSY OPTIONS: Early Volatility Buyer
- +7,500 TYM5 111 straddles, 156
- 2,000 TYN5 109/114 strangles ref 111-10
- 1,058 FVM5 108.5/109.5/110.5 call flys ref 108-12
- +1,000 FVK5 108.25/108.5 strangles, 18.5 ref 108-11.75
BONDS: Gilt Bulls Unable To Force Break Below 200bp Vs. Bunds
The combination of beta to Tsys, this morning’s gilt remit revision and softer-than-expected UK PMI data has driven gilt outperformance vs. Bunds, with the UK/German 10-Year yield spread ~8bp tighter on the day at 202bp.
- The spread currently trades around the middle of its year-to-date range (177-227bp, based on closing levels).
- Gilt bulls were unable to force a break below 200bp, with the spread basing at 200.4bp around 12:00 BST.
- Gilt bulls have not managed to push the spread back below the 200bp mark since the break above on April 9.
- Potential meaningful reallocation flows out of Tsys have made the spread particularly difficult to trade in recent weeks, as have a couple of instances of reduced liquidity further out the UK curve.
- Outside of the intraday noise, longer term focus continues to fall on relative fiscal outlooks, with the UK already experiencing limited fiscal headroom, while Germany has pledged meaningful fiscal expansion, which is set to drive an uptick in issuance over the medium-term.
