EURJPY TECHS: Trend Structure Remains Bullish

• RES 4: 171.28 1.382 proj of the Feb 28 - Mar 18 - Apr 7 price swing
• RES 3: 171.09 High Jul 23 ‘24  
• RES 2: 170.47 76.4% Fibonacci retracement for Jul - Aug ‘24 downleg
• RES 1: 169.91 1.236 proj of the Feb 28 - Mar 18 - Apr 7 price swing
• PRICE: 169.47 @ 16:23 BST Jul 02 
• SUP 1: 168.46 Low Jul 01 
• SUP 2: 167.41 20-day EMA 
• SUP 3: 166.04 Low Jun 19   
• SUP 4: 165.30 50-day EMA   

The trend set-up in EURJPY remains bullish and the cross is trading just below its latest highs. Recent gains resulted in a break of 166.69, the Oct 31 ‘24 high. Scope is seen for a climb towards 170.47, a key Fibonacci retracement point. Note that the uptrend is in overbought territory, a pullback would unwind this condition. Support to watch lies at 167.41, the 20-day EMA. A break of the EMA would suggest potential for a deeper retracement.

• Stocks are inching higher in late Wednesday trade, Dow Jones Industrials still mildly weaker vs. decent gains in Nasdaq with tech stocks bouncing. Currently, the DJIA trades down 19.36 points (-0.04%) at 44475.64, S&P E-Minis up 22.5 points (0.36%) at 6271.25, Nasdaq up 168.1 points (0.8%) at 20371.28.
• Helping support equities earlier - Pres Trump announced a trade deal with Vietnam. "The Terms are that Vietnam will pay the United States a 20% Tariff on any and all goods sent into our Territory, and a 40% Tariff on any Transshipping. In return, Vietnam will do something that they have never done before, give the United States of America TOTAL ACCESS to their Markets for Trade. In other words, they will “OPEN THEIR MARKET TO THE UNITED STATES,” meaning that, we will be able to sell our product into Vietnam at ZERO Tariff."
• Leading gainers in the Information Technology sector included: First Solar +7.70%, NXP Semiconductors +4.81%, Seagate Technology +4.38%, ON Semiconductor +4.18%, Applied Materials +3.38% and Super Micro Computer +2.80%. The Materials sector followed with miners, chemicals and steel producers remained elevated in late trade: Albemarle Corp +8.16%, Freeport-McMoRan +3.29%, Nucor +2.62%, Dow Inc +2.53% and The Mosaic Co +2.34%.
• Health Care sectors continued to weigh on major averages in the second half, care and services providers weighed on the former with Centene hammered -39.44% after withdrawing earnings guidance for 2025. Following suit, Molina Healthcare fell -20%, Elevance Health -9.41%, UnitedHealth Group -4.03%, Cigna Group -2.81% and Humana -2.74%.
• The Wall Street Journal reported “Centene's move comes after industry bellwether UnitedHealth pulled its guidance for the year and replaced its chief executive. It is likely to add to investors' nervousness about the entire insurance sector, which has felt the effect of higher-than-expected medical costs. Humana and CVS Health's Aetna struggled last year, with CVS also bringing on a new CEO."

Gilt yields soared Wednesday on renewed concerns over the UK's fiscal outlook.

• Gilts weakened sharply in early afternoon trade amid speculation that UK Chancellor Reeves could leave her post after the government was forced to water down its welfare reform bill. EGBs weakened in tandem.
• UK yields later edged off their highs after PM Starmer expressed his "full support" for Reeves but the damage was done, in one of the worst sessions for the long end in the last 2+ years including a 20+bp rise for the 30Y at one point.
• In some constructive developments for bonds, BoE MPC member Taylor elicited a dovish short-end reaction after saying 5 cuts might be needed; while there was a brief Treasury-led rally after US private payrolls unexpectedly contracted. Also, Italian/Eurozone unemployment came in higher than expected.
• Both the German and UK curves bear steepened on the day, with Gilts of course underperforming Bunds. Periphery/semi-core EGB spreads tightened, led by Spain.
• Thursday's calendar includes final Services PMIs and the account of the June ECB policy meeting. Global attention will be on US pre-holiday data, including the nonfarm payrolls report, with some attention also paid to Swiss inflation.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.4bps at 1.863%, 5-Yr is up 3.5bps at 2.183%, 10-Yr is up 9bps at 2.664%, and 30-Yr is up 6.4bps at 3.117%.
• UK: The 2-Yr yield is up 5.4bps at 3.881%, 5-Yr is up 10.6bps at 4.042%, 10-Yr is up 15.8bps at 4.612%, and 30-Yr is up 19.1bps at 5.42%.
• Italian BTP spread down 2.5bps at 85bps / Spanish down 2.8bps at 61.2bps