SILVER TECHS: Trading Below Tuesday’s High For Now

While OAT/Bunds reversed the early widening impetus on Monday, French paper still lagged peripheral equivalents in the wake of Fitch’s one-notch rating downgrade of France.

• Fitch’s move underscored rating divergence between the Iberians (with Spain & Portugal receiving one-notch upgrades on the same day), although the bid in equities provided a tightening impulse for OATs & peripherals (vs. Bunds) as the day wore on.
• OAT/Bunds has stabilised below 80bp after failing to re-test early ’25 closing highs (86.3bp).
• The combination of France’s delivery when it comes to the initial stages of fiscal tightening, limited short-term uncertainty with the swift installation of the new PM and markets being more up to speed with the political and fiscal risks than they were during widening instances in ’24 & early ’25 has limited moves higher.
• Underdelivery on the fiscal front or a fresh political shock is probably needed to generate a test of year-to-data highs in the spread.
• The Iberians continue to trade comfortably through 10-Year OATs, with the 10-Year BTP/OAT spread also in marginal negative territory.
• Commerzbank note that they “have heard of some market participants no longer buying OAT repos as a consequence of the downgrade, but this is not showing up in cheaper valuations for now. Term indications are also not cheaper than before the downgrade. However, once a second agency downgrades to single-A, OAT repos may cheapen visibly, similar to BTPs, where more than half of bonds already trade above the depo rate”.

• RES 4: $43.272 - 2.500 proj of the Jul 31 - Aug 14 - 20 price swing
• RES 3: $43.000 - Round number resistance
• RES 2: $42.974 - 2.382 proj of the Jul 31 - Aug 14 - 20 price swing
• RES 1: $42.776 - Intraday high       
• PRICE: $42.712 @ 8:10 BST Sep 16
• SUP 1: $40.432 - 20-day EMA 
• SUP 2: $38.899 - 50-day EMA
• SUP 3: $36.965 - Low Aug 20  
• SUP 4: $36.216 - Low Jul 31 and a key support

Trend signals in Silver remain bullish. The metal traded higher Friday and this delivered a fresh cycle high. The extension higher this week confirms a resumption of the uptrend and maintains the price sequence of higher highs and higher lows. Moving average studies are in a bull-mode position, reinforcing current trend conditions. Sights are on $42.974 next, a Fibonacci projection. Initial support to watch is $40.432, the 20-day EMA.

• The BTP seems to be leading the small few ticks gain, the contract has been bought in 2k, and the lower volumes help move the needle on lower order size.
• Nonetheless, the BTP/Bund spread is looking at breaking through the 76.74bps level, this was the August low and the lowest printed level since 26/03/10.
• As noted back in July, a break below the 75bps level will highlight 70bps next, but more importantly, the next big support resides at 65.37bps, the 2009 low.