POWER: Sunly Receives Loans for 329MW in Latvia

• Despite a softer-than-expected retail sales print in May, AUD weakness on Wednesday is more reflective of broader G10 declines as the dollar trades on a more stable footing. Two key factors have helped stabilise the greenback: the reversal higher for US yields from dovish extremes and an important technical support holding for the DXY, a trendline drawn across the 2011 and 2021 lows.
• Despite this, AUDUSD is broadly consolidating at more elevated levels following Monday’s break back above 0.6550 and subsequent extension to fresh recovery highs. Price action bolsters the medium-term bullish trend set-up, and sights remain on key resistance at 0.6688, the US election related highs.
• The RBA is more sanguine about the risk of a global slowdown than it was in May when it cut the cash rate by 25 basis points to 3.85%, with any trade-related impacts likely to take time to materialise domestically and as China shows resilience, MNI understands. The board will meet on July 8 – all surveyed analysts so far expect a 25bp cut to 3.60%.

• In the equity space, the trend condition in S&P E-Minis is unchanged, it remains bullish and the contract has continued to appreciate this week. Short-term resistance and a bull trigger at 6128.75, the Jun 11 high, has recently been breached. The clear break confirms a resumption of the uptrend that started Apr 7. The 6200.00 handle has been cleared too, this opens 6277.50, the Feb 21 high and bull trigger. Key support is at the 50-day EMA - at 5975.80. First support lies at 6102.47, the 20- day EMA.
• Trend signals in EUROSTOXX 50 futures remain bearish, however, the recovery from the Jun 23 low appears to be a reversal and the contract is holding on to the bulk of its most recent gains. Price has traded through the 20- and 50-day EMAs. A clear break of both averages would strengthen a reversal theme. This would open 5486.00, the May 20 high and bull trigger. On the downside, a breach of 5194.00, the Jun 23 low, would reinstate a bearish theme.

The combination of this morning’s 10-year supply alongside negative spillovers from US Treasuries has weighed on Bund futures, now -35 ticks at 130.14 (albeit off lows of 130.08). Futures remain above Monday’s low (130.00) for now, but a bearish threat is present and a clear move below prior support at 130.12 would highlight this threat, undermine the recent bullish theme, and signal scope for an extension lower. 

• Germany sold E6bln of the new 10-year 2.60% Aug-35 Bund this morning. Demand metrics were a bit softer than the last auction of the previous on-the-run line, but the reaction in Bund futures was contained.
• The German curve has bear steepened (note: 10-year yields are skewed higher owing to a BBG benchmark roll), with Schatz yields up 1bp and 30-year Bund yields up 3.5bps.
• 10-year EGB spreads to Bunds are biased a little wider, but remain within 1bp of yesterday’s closing levels. French PM Bayrou survived a no-confidence vote last night – as expected.
• This morning’s Eurozone data hasn’t been market moving. The Italian unemployment rate surprisingly jumped to 6.5% (vs an upwardly revised 6.1% prior), which also pushed the Eurozone-wide reading a tenth above consensus to 6.3%.
• Further commentary from the ECB’s Sintra forum will be eyed, particularly in relation to recent exchange rate moves. The MNI Policy Team released an interview with Bank of Portugal Governor Centeno this morning.