GBPUSD TECHS: Trading Near Its Recent Lows

• RES 4: 1.1222 61.8% of Feb 10 - Mar 7 sell-off
• RES 3: 1.1185/1220 High Mar 31 / 3.0% Upper Bollinger Band
• RES 2: 1.1099 50-day EMA
• RES 1: 1.0996 20-day EMA
• PRICE: 1.0884 @ 06:12 BST Apr 11
• SUP 1: 1.0837 Low Mar 8
• SUP 2: 1.0806 Low Mar 7 and the bear trigger
• SUP 3: 1.0767 Low May 7 2020
• SUP 4: 1.0727 Low Apr 24, 2020

EURUSD traded lower Friday and, despite today’s initial gains, the outlook remains bearish. Sights are on the key support at 1.0806, Mar 7 low and the bear trigger. The recent failure at 1.1185, Mar 31 high highlights a bearish threat and last week’s move lower has reinforced this theme. A break of 1.0806 would confirm a resumption of the downtrend and open 1.0767, the May 7 2020 low. Clearance of 1.1185 is needed to reinstate a bull theme.

Spill over from Bunds/French political matters weighed on the U.S. Tsy space during the first Asia-Pac session of the week, with TYM2 -0-16 at 119-20 ahead of London hours, 0-03 off the base of the 0-18 overnight range, on volume of ~150K. Cash Tsys are 4.5-7.5bp cheaper across the curve, with bear flattening in play. Note that 3- to 30-Year yields tagged fresh cycle highs during Asia-Pac dealing.

• French President Macron’s lead in the first round of the country’s Presidential election drove the space lower (pollster projections point to a narrow Macron victory vs. far right candidate Le Pen after the second round of voting, which is due in a couple of weeks), with Bunds shedding over 100 ticks at one point, before correcting from worst levels.
• Furthermore, oil futures were under pressure during the Asia-Pac session, shedding over $2.00/bbl, which reduced some of the stagflationary worry in markets. Although the fact that that dynamic was seemingly driven by Chinese growth/COVID worries may negate some of the explanatory power when it comes to the move in U.S. Tsys.
• Asia-Pac flow was headlined by FV put block sales which seemed to involve rollng down and out the expiry curve (-10.0K FVK2 113.25 puts vs. +15.0K FVM2 112.50 puts) and a block sale of TUM2 futures (-7.4K).
• Weekend Fedspeak from Cleveland Fed President Mester (’22 voter) pointed to elevated inflation through ’23, although she noted that Fed policy will allow the trajectory of inflation to shift lower, while expressing optimism re: the potential for continued economic expansion even as the central bank tightens policy.
• Fedspeak from Governors Bowman & Waller, Atlanta Fed President Bostic (’24 voter) & Chicago Fed President Evens (’23 voter) headline during NY hours.

• RES 4: 142.51 Low Mar 1
• RES 3: 140.71 High Mar 11
• RES 2: 139.23 High Mar 23
• RES 1: 137.75/38.68 20-day EMA / High Mar 31 and key resistance
• PRICE: 134.77 @ Close Apr 8
• SUP 1: 133.96 Low Apr 8
• SUP 2: 133.15 0.50 proj of the Mar 1 - 29 - 31 price swing
• SUP 3: 132.61 Low Apr 22 2020 (cont)
• SUP 4: 131.85 0.618 proj of the Mar 1 - 29 - 31 price swing

BTP futures traded lower again Friday to extend last week’s breach of support at 135.69, the Mar 29 low. The move lower, confirms a resumption of the primary downtrend and highlights a continuation of the broader bearish price sequence of lower lows and lower highs. Moving averages are in a bear mode too. The focus is on 133.15 next, a Fibonacci projection. Firm resistance is seen at 138.68, the Mar 31 high, where a break is required to signal a short-term reversal.