SWAPS: /REPO: Commerzbank Think Schatz Spreads Look Stretched

• RES 4: 114-02   High Oct 17 and the bull trigger 
• RES 3: 113-29   High Oct 22
• RES 2: 113-18+ High Oct 28 
• RES 1: 113-06   20-day EMA 
• PRICE:‌‌ 112-25+ @ 10:48 GMT Nov 3 
• SUP 1: 112-16   Low Oct 30 
• SUP 2: 112-14   Low Oct 9
• SUP 3: 112-06   Low Sep 25 and a reversal trigger
• SUP 4: 111-30   Trendline support drawn from the May 22 low 

Recent weakness in Treasuries undermines a bullish theme. The contract has traded through the 50-day EMA, at 112-26+, highlighting potential for a deeper retracement near-term. A continuation lower would open 112-06, the  Sep 25 low and the next key support. On the upside, the contract needs to trade above 113-18+, the Oct 28 high to signal a possible bullish reversal. Key resistance and the bull trigger is at 114-02, the Oct 17 high.

DBK (21st Nov) 30.5p, traded for 0.57 in 10k.

• UK fiscal developments have been key in shaping the short-term trajectory for sterling, however, there might be greater focus this week on the BOE decision, of which the outcome is far from certain. Indeed, we would categorise our own view as 50/50 between a 25bp cut and a hold given the downside surprises to inflation and wage growth.
• Despite Friday’s GBPUSD close above, last week’s breach of key 1.3142 support is a meaningful development for the pair, strengthening current bearish conditions. Last week’s low at 1.3097 represents the immediate level of note, while more meaningful support is at 1.3041, the Apr 14 low. Below here, support appears scant until 1.2709, the April 07 low.
• EURGBP has weakened a touch to start the week, with the cross returning to the prior breakout point of 0.8769. Note that the overall trend is overbought, and this pullback is considered corrective at this juncture, with initial support coming in at 0.8751, the Sep 25 high. Topside targets for the broader rally include 0.8835 and 0.8875, the April 2023 high.
• Another cross that will remain in focus is GBPAUD, especially given the RBA decision on Tuesday. A break of the recent cycle lows at 2.0244 significantly boosted downside momentum, with the cross printing below 2.00 last week, the lowest level in 8 months. Consolidating weakness may signal scope for an extension lower towards the year’s lows around 1.96.
• Elsewhere this week, DMP data is scheduled after the BOE, which could hint at whether December is in play, while markets will also pay attention to final services PMI figures.