COMMODITIES: Sustained Weakness for WTI Would Expose Bear Trigger at $55.99
A bearish theme in WTI futures remains intact. Note that moving average studies are in a bear-mode position, highlighting a dominant medium-term downtrend. A stronger resumption of the bear leg would open key support and the bear trigger at $55.99, the Oct 20 low. Clearance of this level would resume the downtrend. Key short-term resistance to watch is $61.84, the Oct 24 high. Gold is in consolidation mode. The trend set-up remains bullish. The bear phase between Oct 20 and 28 appears to have been a correction and note that the recovery since Oct 28 signals the end of that corrective cycle. Key support to watch is the 50-day EMA, at $4051.3. Clearance of this EMA would signal scope for a deeper retracement. Sights are on key resistance and the bull trigger at $4381.5, the Oct 20 high.
- WTI Crude down $0.69 or -1.18% at $57.79
- Natural Gas down $0.06 or -1.37% at $4.531
- Gold spot down $10.2 or -0.24% at $4219.06
- Copper up $2.55 or +0.48% at $537.8
- Silver up $0.25 or +0.41% at $62.0718
- Platinum up $12.97 or +0.78% at $1670.71
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GILTS: 2-Year Yields Hit Lowest Since '23 After Soft Labour Market Data
Dovish price action in the wake of this morning’s soft labour market data leaves 2-Year gilt yields at the lowest level seen since August ’24.
- The benchmark trades as low as 3.732%.
- Fresh extension lower would target the 22 August low (3.653%).
- Note that the market now prices over 80% odds of a BoE rate cut in December.
- Meaningful extension lower for 2s in the immediate future would likely require the market to price a December cut with near certainty.
- We get two CPI releases ahead of the Bank’s December meeting (the first coming next week).
- The recent adjustments to the BoE’s forecasts mean that downside surprises to headline CPI are going to be harder to achieve when compared to the previous forecasts.
- If the soft details in today's labour data are not revised away in the next release, we assume that in line CPI readings would be enough to tilt the balance towards Governor Bailey joining the dovish camp, cementing a December cut.
- The 2s10s curve is ~6bp off its October low, last 66.5bp. Uptrend support drawn off the August ’23 lows remained intact during October/early November. We detailed steepening risks for that curve in the early part of last week.
Fig. 1: UK 2-Year Gilt Yields (%)
Source: MNI - Market News/Bloomberg Finance L.P.
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