GERMANY: Potential EUR25bln For New Tanks As Berlin Also Seeks Patriots For Kyiv
Jul-04 10:50
A slew of headlines are being reported this morning regarding both Germany's efforts to bolster its armed forces and to support Ukraine in its fight against Russian invasion.
- Bloomberg reports that Berlin is considering the purchase of 2,500 armoured fighting vehicles and up to 1,000 battle tanks to create new NATO brigades intended to deter any Russian invasion of NATO members in eastern Europe. Bloomberg: "The total order could be worth as much as €25 billion, the people said, caveating that because procurement negotiations are still ongoing, the ultimate number may be lower. The orders are expected to be finalized in the coming months and lawmakers could give a green light by the end of the year, the people said."
- Efforts to bolster NATO's defensive line come as the German gov't is also looking to enhance Ukraine's defensive capacities. On the evening of 3 July, Bild reported that Berlin has requested the supply of two Patriot air defence systems from US Secretary of Defense Pete Hegseth, with the intention of financing their provision for Ukraine.
- Gov't spox Stefan Kornelius confirmed "intensive talks" between Germany and the US on the issue, saying the "brutal" Russian attacks on Kyiv on 3 July demonstrated how urgent the supply of new ordnance is. Defence Minister Boris Pistorius is set to travel to Washington, D.C., in mid-July, with the visit either serving as an opportunity to further press the need for Patriot systems, or as a 'victory lap' having secured their provision for Ukraine.
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US TSYS: Modest Twist Flattening, ISM Services Later On
Jun-04 10:48
- Treasuries sit slightly twist flatter on the day, having remained within yesterday’s range across all benchmark tenors overnight.
- The long end appeared to be helped off lows by Reuters reporting the BoJ is considering slowing the pace of tapering in its bond purchases from next fiscal year onward. It’s not a new idea but helped some demand for JGB futures even if they’ve since pared gains.
- Trade discussions: President Trump on Truth Social: "I like President XI of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!"
- Separately, the EC’s Sefcovic said on X that there has been a productive and constructive discussion with USTR Greer. “We're advancing in the right direction at pace - and staying in close contact to maintain the momentum.”
- Today sees primary data focus on ISM Services although with some sensitivity to ADP and final PMIs before the Fed’s Beige Book for an update on what the Fed is hearing in liaison programs ahead of the Jun 17-18 decision.
- Cash yields are 0.6bp higher (3s) to 1.2bp lower (30s).
- 5s30s at 94.6bp (-1.8bp) is back to Friday’s levels.
- TYU5 trades at 110-15 (00+) on very low volumes of just 215k. It has remained within yesterday’s range throughout.
- Resistance continues to be watched at 110-30 (May 30 and Jun 2 highs), having topped out at 110-26+ yesterday, whilst support is seen at 109-26 (May 29 low) after which lies a bear trigger at 109-12+ (May 22 low).
- Data: MBA mortgage apps (0700ET), ADP May (0815ET), S&P Global US serv/comp final PMIs (0945ET), ISM Services May (1000ET)
- Fedspeak: Bostic & Cook moderate Fed Listens event (0830ET) – see STIR bullet – before Beige Book (1400ET)
- Bill issuance: US Tsy $60B 17W bill auction (1130ET)
OUTLOOK: Price Signal Summary - Monitoring Resistance In WTI
Jun-04 10:46
- On the commodity front, a bullish theme in Gold remains intact and this week’s gains reinforce current conditions. Medium-term trend signals are bullish too - moving average studies remain in a bull-mode position, highlighting a dominant uptrend. Sights are on $3435.6 next, the May 7 high. A break of this hurdle would strengthen bullish conditions. On the downside, key support and the bear trigger to watch has been defined at $3121.0, the May 15 low. First support lies at $3302.4, the 20-day EMA.
- In the oil space, WTI futures continue to trade closer to their recent highs. A bear threat remains present and the recovery since Apr 9 still appears corrective. A key resistance area to monitor is $62.51, the 50-day EMA. It has again been pierced. A clear break of it would instead highlight a stronger reversal and open $65.82, the Apr 4 high. For bears a reversal lower would refocus attention on $54.33, the Apr 9 low and bear trigger. First support to watch lies at $59.74, the May 30 low.
EUR: EURJPY and EURGBP Displaying Divergent Trend Signals
Jun-04 10:45
- A bullish theme in EURJPY remains intact. The latest recovery from the May 23 low, signals the end of the corrective pullback between May 13 - 23. If correct, the move higher also marks a resumption of the uptrend. Sights are on a cluster of resistance around the 165.00 mark, which has been of pivotal significance dating back to the BOJ’s intervention back in July last year.
- 165.21, the May 13 high remains the technical bull trigger, of which a breach would target a move towards 166.10 (Nov 6 high) and 167.40, a Fibonacci retracement. Key short-term support lies at 161.09, the May 23 low, where a break is required to highlight a stronger reversal and suggest scope for a deeper correction.
- Conversely, a downtrend in EURGBP remains intact following a false breach of the 50-day EMA. A sustained break of this average is required to highlight a stronger reversal higher. On the downside, support to watch lies at 0.8356, the May 29 low. Clearance of this level would resume the downtrend and open 0.8316, the Mar 28 low and a key support.
