JGBS: Slight Twist-Steepener, $550bn Investment In US In Focus

• RES 4: 1.1851 High Sep 10 2021
• RES 3: 1.1829 High Jul 01 and the bull trigger 
• RES 2: 1.1789 High Jul 24 
• RES 1: 1.1743 High Aug 22
• PRICE: 1.1710 @ 06:07 BST Sep 1
• SUP 1: 1.1574/1.1528 Low Aug 27 / Low Aug 5 
• SUP 2: 1.1392 Low Aug 1 and bear trigger 
• SUP 3: 1.1373 Low Jun 10 
• SUP 4: 1.1313 Low May 30 

EURUSD has recovered from last week’s low. The trend set-up is bullish and short-term pullbacks are considered corrective. Note that the pair has pierced key support around the 50-day EMA, currently at 1.1607. A clear break of the average would signal scope for a deeper retracement and potentially expose key M/T support at 1.1392, the Aug 1 low. Key resistance and the bull trigger is at 1.1829, the Jul 1 high. A break would resume the primary uptrend.

• RES 4: 130.60 High Aug 5 and a key resistance  
• RES 3: 130.26 High Aug 8  
• RES 2: 130.06 High Aug 14
• RES 1: 129.77/90 50-day EMA / High Aug 28  
• PRICE: 129.38 @ 05:45 BST Sep 1
• SUP 1: 129.15/128.64 Low Aug 26 / 15 and the bear trigger  
• SUP 2: 128.40 Low Apr 9
• SUP 3: 128.19 Low Mar 27 (cont) 
• SUP 4: 127.83 76.4% retracement of the Mar 11 - Apr 7 bull leg (cont)  

Bund futures continue to trade above their August lows. Resistance at the 50-day EMA, at 129.77, has recently been pierced. A clear breach of the EMA would signal scope for a stronger recovery within the multi-month range. This would open 130.06, the Aug 14 high. Key support and the bear trigger lies at 128.64. Clearance of this level would reinstate the recent bearish theme.

After falling close to a percent on Friday, oil prices have trended lower again during today’s APAC trading as risk appetite softened and expected excess supply going forward weighed. WTI is down 0.4% to $63.73/bbl after a trough of $63.66. Brent is 0.4% lower at $67.18/bbl after falling to $67.12. The USD index is little changed.

• OPEC+ will meet on September 7 to decide its October production target. There are still 1.65mbd of previous voluntary output cuts that could be unwound. The market is already very nervous about the increase in OPEC supply announced to date and will watch the outcome of the meeting closely.
• Progress towards a Ukraine peace deal appears to have stalled and with it any chance of an easing of sanctions on Russia. Last week the US imposed a 25% punitive tariff on India for continuing to buy Russian crude. It is attending the summit in China and PM Modi is scheduled to meet with President Putin on Monday.
• The focus of the week is likely Friday’s US August payrolls release with Bloomberg consensus expecting a 75k rise in jobs but the unemployment rate rising 0.1pp to 4.3%.
• The US is closed for a holiday today. Later ECB President Lagarde speaks and ECB’s Schnabel and Cipollone appear. European August manufacturing PMIs and euro area July unemployment are released.