AUDUSD TECHS: Pullback Exposes Key Short-Term Support
- RES 4: 0.6707 High Sep 17 and a bull trigger
- RES 3: 0.6666 2.0% 10-dma Envelope
- RES 2: 0.6644 76.4% retracement of the Sep-Oct bear leg
- RES 1: 0.6542/0.6618 50-day EMA / High Oct 29
- PRICE: 0.6488 @ 07:59 GMT Nov 5
- SUP 1: 0.6459 Intraday low
- SUP 2: 0.6440 Low Oct 14 and key support
- SUP 3: 0.6415 Low Aug 21 / 22 and a bear trigger
- SUP 4: 0.6373 Low Jun 23
A softer short-term tone in AUDUSD remains intact for now and this week’s move lower reinforces this theme. The pair has also traded through the 50-day EMA - a bearish development that undermines a recent bullish theme. A continuation lower would signal scope for an extension towards the first key support at 0.6440, the Oct 14 low. Key resistance and a short-term bull trigger is at 0.6618, the Oct 29 high. First resistance is at 0.6542, the 50-day EMA.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
GILTS: Bear Steepening
Gilts open lower on global cues, after the JGB curve steepened as a new PM was elected and with OATs struggling as French political risks deepen.
- Futures pierce Thursday’s low, basing at 90.51.
- Bears remain in technical control at this stage, particularly with UK fiscal risks lingering. Initial support and resistance in futures still located at 90.26 & 91.28, respectively.
- Yields 2-6bp higher.
- 10s still comfortably within their recent 4.60-4.80% range, last 4.73%.
- 2s10s and 5s30s stick within their respective multi-week ranges, trading ~7bp and ~10bp below their cycle closing highs. Steepening trends intact.
- BoE-dated OIS still shows ~5bp of easing through year-end and is not discounting the next 25bp cut until the end of the April MPC.
- We continue to believe that markets underprice the odds of a Q4 rate cut.
- Comments from BoE Governor Bailey are due today.
- They will be closely scrutinised (even though he spoke as recently as Friday), particularly after Deputy Governors Ramsden & Breeden failed to push back against the idea of rate cuts last week.
- We have previously suggested that Bailey and those two Deputies would probably have to join dovish dissenters Dhingra & Taylor if we were to see a cut in Q4.
- Lower tier construction PMI data is due today.
- Elsewhere, the BoE will sell GBP775mln of short bucket gilts from its APF (3- to 7-Year).
OAT: 10-year OAT/Bund Spread Pierces December 2024 Closing High
The 10-year OAT/Bund spread has pierced the December 2024 closing high of 87.8bps following Lecornu’s resignation. The spread is now 7bps wider on the session.
- While the timing of Lecornu’s resignation has come as a surprise, his prospects were appearing bleak amid opposition from both sides of the political spectrum during his short (less than 1 month) tenure in office.
- President Macron is now faced with a familiar dilemma in needing to appoint another PM (or face calling a fresh legislative election). Our Political Risk team will provide more colour in due course.
- Clearly, the EC’s deadline for 2026 budget drafts (October 13th) is extremely unlikely to be met by France, further delaying hopes of needed fiscal consolidation.
EUR: EUR/USD Slips Through Horizontal Support on Lecornu Resignation
- EUR extends losses on the back of that resignation: EUR/USD now through earlier lows as well as the Oct02 low at 1.1683. French equities also see weakness - with the CAC40 easily the underperformer in Europe.
- Lecornu's resignation opening up more criticism from other parties: National Rally's Bardella says the government have shown they have understood "nothing" regarding the country's problems.
- Next major support in EURUSD crosses at 1.1646, the late Sept low. Weakness through here snaps the weak uptrend posted off the August 1st low.
