AUDUSD TECHS: Trend Needle Still Points South
- RES 4: 0.7266 High May 4/5 and a bull trigger
- RES 3: 0.7230 50-day EMA
- RES 2: 0.7135 Low May 6
- RES 1: 0.6953/7054 High May 12 / High May 11 and key resistance
- PRICE: 0.6894 @ 06:49 BST May 13
- SUP 1: 0.6829 Low May 12
- SUP 2: 0.6805 Low Jun 22 2020
- SUP 3: 0.6784 0.764 proj of the Apr 5 - May 2 - 4 price swing
- SUP 4: 0.6759 50.0% retracement of the Mar ‘20 - Feb ‘21 upleg
AUDUSD maintains a bearish tone and resumed its downtrend once again yesterday. The move lower marks an extension of the reversal last week from 0.7266, the May 4/5 high. Moving average studies remain in a bear mode, highlighting current sentiment. Support at 0.6968, the Jan 28 low and a bear trigger, has been breached. This opens 0.6805 next, the Jun 22 2020 low. Initial firm resistance is at Wednesday’s high of 0.7054.
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EUROZONE ISSUANCE: EGB Supply For W/C Apr 11, 2022
The Netherlands, Germany and Italy are due to sell bonds this week. We look for gross nominal issuance of E20.0bln, down from E30.7bln this week.
- The Netherlands kicked off issuance for the week yesterday selling E2.505bln (vs E1.5-2.5bln range) of the 10-year 0.50% Jul-32 DSL (ISIN: NL0015000RP1).
- Also on Tuesday, Germany sold E5.5bln (E4.453bln allotted) of the 0% Mar-24 Schatz (ISIN: DE0001104875).
- Today, Italy will come to the market to sell up to E8bln with a new 3-year, on-the-run 7-year and 30-year BTPs and off-the-run 7-year and 18-year BTPs on offer: E3.25-3.75bln of the new 1.20% Aug-25 BTP, E1.25-1.50bln of the 0.45% Feb-29 BTP, E0.75-1.00bln of the 3.00% Aug-29 BTP (ISIN: IT0005365165), E0.50-0.75bln of the 3.10% Mar-40 BTP (ISIN: IT0005377152) and E0.75-1.00bln of the 2.15% Sep-52 BTP (ISIN: IT0005480980).
- Also this morning, Germany will return to the market to sell E4bln of the 10-year 0% Feb-32 Bund (ISIN: DE0001102580).
NET NOMINAL FLOWS: Redemptions for the week will total E24.0bln with the most notable being a formerly 7-year BTP to mature on Friday for E17.8bln, a 5-year RFGB for E5.2bln also Friday and a floating PGB on Tuesday. Coupon payments are expected to come in at E3.6bln, of which E1.7bln are German and E0.9bln Portuguese. This would leave estimated net flows for the week at negative E7.6bln (from positive E7.2bln this week).
For a calendar of all announced EGB/EU/ESM/EFSF auctions see the MNI EZ/UK Bond Supply Calendar here.
AUDUSD TECHS: Bearish Short-Term Outlook
- RES 4: 0.7762 76.4% retracement of the Feb ‘21 - Jan ‘22 downleg
- RES 3: 0.7716 High Jun 16 2021
- RES 2: 0.7643/61 2.0% 10-dma envelope / High Apr 5
- RES 1: 0.7519 High Apr 7
- PRICE: 0.7453 @ 06:49 BST Apr 13
- SUP 1: 0.7400 Low Apr 12
- SUP 2: 0.7376 Low Mar 22
- SUP 3: 0.7361 50-day EMA
- SUP 4: 0.7283 Low Mar 17
The current AUDUSD bear cycle remains intact following the recent pullback from resistance at 0.7661, Apr 5 high. Note that price activity on Apr 5 confirmed a bearish candle - a shooting star - and the subsequent move lower reinforces this pattern. The 20-day EMA at 0.7449, has been breached. This opens the 50-day EMA at 0.7361. Key resistance is at 0.7661 and also represents the trigger for a resumption of bullish activity.
UK DATA: Inflation data due at 7:00BST
- UK inflation data is due at 7:00BST. This is probably the single most important UK data release for markets at present. Economists forecast CPI at 6.7% y/y in March, a decent increase from the 6.2% y/y in February, which was the highest level since March 1992. Core inflation is expected to rise more moderately, to 5.3% from 5.2%, the record-high a month earlier.
- Looking at the survey breakdown, economists see some downside risks to today's headline print while our data team note that a surge in fuel costs suggests upside risk to the consensus forecast. In terms of core inflation, analysts are fairly split between 5.3% and 5.4%, so there appear to be upside risks here.
- SONIA futures moved higher after yesterday's lower than expected US CPI print. However, markets still price in 28bp for the BOE's May meeting (unchanged in the last week or so but down from 35bp shortly after the March meeting). Markets continue to price around 137bp of hikes by year-end. We have remained in a broad 128-148bp range since 22 March, so are in the middle of the recent range.
- A surprise to CPI today could therefore see some two-way risks to SONIA futures when they open at 7:30BST. We still think overall there is too much priced into the curve but unless we get a surprisingly low print today we're unlikely to move out of that range.
- Note that although this is the biggest remaining data release ahead of the May MPC meeting, as the data is for March it doesn't incorporate the increase in the energy price cap which came into effect on 1 April so inflation will still rise further from here.
