EURGBP TECHS: Rally Extends

• RES 4: 1.4021 1.236 proj of the Nov 4 - Jan 6 - Jan 19 price swing        
• RES 3: 1.3913 High Sep 14 2021 
• RES 2: 1.3889 1.00 proj of the Nov 4 - Jan 6 - Jan 19 price swing  
• RES 1: 1.3868 High Jan 27
• PRICE: 1.3721 @ 16:19 GMT Jan 30
• SUP 1: 1.3710 High Sep 17 2025 
• SUP 2: 1.3664 Low Jan 27
• SUP 3: 1.3566 20-day EMA 
• SUP 4: 1.3462 50-day EMA

GBPUSD continues to trade closer to its recent highs. A strong uptrend remains intact following recent impulsive gains. The climb signals scope for an extension towards 1.3889 next, a Fibonacci projection. Note that the trend remains in an extreme overbought position and this highlights the near-term risk of a pullback that would unwind the overbought reading. Firm support to watch is at the 20-day EMA, at 1.3566.       

EGB and Gilt yields closed Friday little change, sealing Bund outperformance of Gilts for the week.

• Most of the session's price action was dictated by movements in US Treasuries as opposed to anything Europe-centric.
• Specifically, the White House naming Kevin Warsh as the nominee to lead the Federal Reserve triggered some bear steepening, the logic appearing to be: he is seen as less dovish on short rates than some of his competitors for the role, but he has long been vocal in calling for a smaller Fed balance sheet.
• That said, European data was on the hawkish side, with slightly firmer-than-expected Eurozone Q4 GDP (0.3%)  and ECB inflation expectations, as well as an upside surprise in German and Spanish flash January inflation.
• The German curve leaned bear flatter on the day with the UK's bear steepening. Periphery/semi-core EGB spreads closed mixed but little changed overall.
• For the week the German curve bull flattened (2Y -4bp, 10Y -6bp), with Gilts twist steepening lightly (2Y -1bp, 10Y +1bp).
• S&P is scheduled to review Italy's sovereign rating after the cash close; an upgrade in the outlook to Positive is seen possible. Next week's calendar is packed, with the BOE and ECB decisions and the conclusion of the Eurozone January flash inflation round.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.6bps at 2.089%, 5-Yr is down 0.1bps at 2.417%, 10-Yr is up 0.3bps at 2.843%, and 30-Yr is up 0.5bps at 3.494%.
• UK: The 2-Yr yield is up 0.4bps at 3.718%, 5-Yr is up 0.4bps at 3.95%, 10-Yr is up 1.1bps at 4.522%, and 30-Yr is up 1.5bps at 5.285%.
• Italian BTP spread up 0.4bps at 61.3bps / French OAT down 0.3bps at 58.5bps  

• -27,800 USH6 106 puts, 1 ref 115-03, still bid there, likely unwind with open interest 28,501 coming into the session