OUTLOOK: Price Signal Summary - Gilts Remain Vulnerable
- In the FI space, Bund futures remain soft following last week’s move lower. The pullback from 130.20, the Oct 12 high highlights the end of the recent corrective recovery between Oct 4 - 12. Note that the medium-term trend direction is down and moving average studies continue to reflect this. An extension lower would open 126.62, the Oct 4 low and bear trigger. Key short-term resistance and the bull trigger has been defined at 130.20. First resistance is at 128.68, the 20-day EMA.
- Gilt futures traded lower last week and the contract maintains a bearish theme. Price has cleared key support at 91.47, the Aug 17 low. This confirms a resumption of the downtrend and paves the way for a move towards 90.38, the Oct 12 2022 low (cont) and a major support. Initial firm resistance is at 93.35, the 20-day EMA. Short-term gains would be considered corrective.
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JGB TECHS: (Z3) Trend Needle Points South
- RES 3: 148.74 - High Jul 24
- RES 2: 147.21 - High Aug 9
- RES 1: 146.41 - High Sep 4
- PRICE: 145.44 @ 20:09 BST Sep 22
- SUP 1: 144.15 - Low Jan 13 and a major support
- SUP 2: 143.95 - 2.00 proj of the Sep 8 - 12 - 15 price swing
- SUP 3: 143.29 - 2.618 proj of the Mar 22 - Apr 18 - May 12 swing
JGBs sold off sharply on Sep 11 and the contract has since traded through support at 145.49, the Aug 17 low. A continuation lower and the clear break of this area confirms a resumption of the medium-term downtrend and paves the way for weakness towards 144.15, theJan 13 low and a major support. On the upside, clearance of 146.41, the Sep 4 high would instead highlight a base and a possible short-term reversal.
AUSSIE 10-YEAR TECHS: AUSSIE 10-YR TECHS: (Z3) Medium-Term Trend Direction Remains Bearish
- RES 3: 96.160 - High Jul 20
- RES 2: 96.050 - HIgh Sep 4 and a key resistance
- RES 1: 95.923 - High Sep 15
- PRICE: 95.660 @ 20:02 BST Sep 22
- SUP 1: 95.550 - 1.00 proj of the Jul 20 - Aug 17 - Sep 4 price swing
- SUP 2: 95.300 - 1.50 proj of the Jul 20 - Aug 17 - Sep 4 price swing
- SUP 3: 94.868 - 1.0% 10-dma envelope
The Aussie 10 yr futures broader trend direction is down and the key support and bear trigger at 95.660, the Aug 17 low, has been breached. The break of this level reinforces a bearish theme and also confirms the breach of a major support at 95.670, the Jun 17 2022 low, marking a resumption of the medium-term downtrend. Initial key resistance has been defined at 96.050, the Sep 4 high.
US TSYS: Discounting Higher for Longer Policy Messaging
- Generally quiet end to a hectic week, 10Y Treasury yields off new 16Y high of 4.5064% tapped early overnight to 4.4377% after Friday's close as markets discounted the Fed and BOE "hawkish hold" or higher for longer messaging Friday.
- Federal Reserve Governor Michelle Bowman on Friday called for "further rate hikes" to bring inflation back to target, citing too-high inflation and risk that rising energy prices could reverse past progress.
- Boston Fed President Susan Collins said Friday further tightening is not off the table and emphasized that she expects rates to stay higher for longer. "I fully support the FOMC statement and agree with the policy guidance in the median SEP projections. I expect rates may have to stay higher, and for longer, than previous projections had suggested, and further tightening is certainly not off the table," she said in prepared remarks.
- Meanwhile, San Francisco Fed President Daly said it's "unlikely inflation will reach 2% goal in 2024.
- Treasury futures drew support after Flash PMI data comes out mixed: S&P Global US Manufacturing PMI (48.9 vs 48.2 est), Services PMI (50.2 vs. 50.7 est), Composite PMI (50.1 vs. 50.4 est).
- Cross asset summary: Greenback firmer (DXY +.195 at 105.558), Gold firmer (+4.92 at 1924.94), crude firmer (WTI +.77 at 90.40) and stocks marking modest gains again after retreating late: DJIA up 45.93 points (0.13%) at 34119.34, S&P E-Mini Futures up 12.25 points (0.28%) at 4384.5, Nasdaq up 62.1 points (0.5%) at 13287.28.
