FRANCE: PM To Speak On Budget Choice At End Of The Day; Both Options Risky (1/2)

• In the FI space, Bund futures are in consolidation mode. A bear cycle is intact and the contract is trading closer to its recent lows. Scope is seen for an extension towards the 127.00 handle. Key short-term resistance is 128.75, the Dec 3 high. Note that the contract is still oversold. A stronger corrective bounce would allow this oversold condition to unwind. The price pattern on Dec 10 is a doji candle - a short-term reversal signal.
• Recent activity in Gilt futures highlights 90.50, the Dec 16 low, and 91.93, the Nov 27 high, as two important short-term directional triggers. A clear breach of 90.50 would signal scope for a deeper retracement towards 89.86, the Nov 19 low and bear trigger. For bulls, a stronger resumption of gains and a breach of 91.93, would instead signal scope for a climb towards resistance at 92.55, the Nov 11 high.

EURNOK’s impressive rally since last Thursday’s soft Regional Network survey has stalled at the 12.0000 figure. Although we expect a dovish revision to Norges Bank’s December MPR rate path tomorrow, recent price action suggests NOK FX will be more sensitive to a smaller-than-expected downward revision relative to September.

• If Norges Bank’s decision is interpreted as less dovish expected, initial downside focus in EURNOK will be on the prior breakout level of 11.8612 (Nov 25 high). This level shields the 20-day EMA at 11.8123.
• Overnight EURNOK implied vols are well bid with the ECB decision also due tomorrow, currently at the highest since late October. That pushes the breakeven on an overnight ATM straddle expiring at tomorrow’s NY cut to around 0.45%.
• Norges Bank’s decision is due at 0900GMT/1000CET, just 30 minutes after the Riksbank.
• See our previews for tomorrow’s Scandi decisions here:
  • Norges Bank
  • Riksbank

Figure 1: EURNOK Since June 2023 (Source: Bloomberg Finance L.P)

• EUR/USD: Dec18 $1.1550(E1.9bln), $1.1600(E1.3bln), $1.1700(E1.2bln), $1.1750(E2.7bln), $1.1797-00(E1.2bln), $1.2000(E1.9bln); Dec19 $1.1500(E3.0bln), $1.1650(E1.2bln), $1.1675-80(E2.2bln), $1.1750-60(E3.5bln), $1.1785-00(E4.6bln), $1.1850(E1.7bln), $1.1900(E2.0bln), $1.2000(E3.2bln); Dec22 $1.1675($1.2bln), $1.1700(E1.3bln)
• USD/JPY: Dec18 Y155.00($3.4bln), Y156.00($3.1bln), Y156.25($2.3bln), Y157.00($4.0bln), Y158.00($4.8bln), Y158.50($1.9bln), Y159.00($6.5bln); Dec19 Y155.00($2.0bln)
• EUR/GBP: Dec19 Gbp0.8800(E1.3bln), Gbp0.9000(E1.4bln)
• AUD/USD: Dec18 $0.6540-50(A$1.6bln), $0.6665-75(A$1.3bln); Dec19 $0.6675(A$1.1bln), $0.6700(A$1.6bln)
• AUD/NZD: Dec18 N$1.1410(A$1.5bln); Dec19 N$1.1300(A$1.1bln)
• USD/CAD: Dec19 C$1.3800($940mln), C$1.3825($1.7bln), C$1.3900($1.7bln), C$1.3950($1.2bln), C$1.4000($1.5bln)