BUNDS: Two BoJ decent keeps the pressure on Bond Futures
- A 13 ticks range for Bund overnight, the contract is a touch in the red with US Treasuries, but both Bund and Tnotes are still just short of Yesterday's lows, following some heavy selling post the US IJC Beat.
- Overnight the BoJ kept (as expected) its rate unchanged, but saw two Hawkish decent, voting for a 25bps hike, helping keep the lid on Bonds futures.
- UK Retail sales beat expectation by 1 tenth but was revised lower, some Desks are taking a closer look at the Public Sector Net Borrowing that saw an overshoot.
- Since Bund is breaking through the initial support seen at 128.31 post Cash Open, next would see 128.04, these are very short term retrace levels of the September range.
- Small resistance moves down to 128.90 but the 129.13 gap is the level to watch, this level printed to the tick during the FOMC Meeting.
- There are no Tier 1 Data left for the session with the UK Retail sales behind us. Canadian Retail Sales won't impact Bund.
- Today is Triple Witching day for Equities, so expect potential Gamma Volatility at and post respective Expiries in Europe and this afternoon in the US.
- Option Expiries in Notional Term in the SPX are above $3 Trillions, these are big, although still lower than the $3.53T seen in September 2024.
- SPEAKERS: BoJ Ueda's presser, Fed Miran (x2), Daly.
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UK DATA: September peak expectations unlikely to change but food a concern
- Food price inflation coming in higher than expected will be a bit of a concern. Note that the BOE's forecasts for the next 2-3 months are already above consensus though, with a number of analysts in their previews noting the potential that we are close to the peak.
- The September peak is unlikely to be meaningfully different to where it was expected before this data, however, with air fares likely to have normalised by then (albeit they are so volatile it's hard to say that with much certainty!)
- Note that cultural services also contributed 5 hundredths positively this month (double that for services). That's where concert prices etc goes into. There is also potential for that to be reversed out.
- So that's 25 hundredths of upside pressure from accommodation (which is partly base effects), air fares (which are timing related) and cultural services this month.
- On the positive side rents fell to 4.54% from 5.84%Y/Y which took 10 tenths off of headline CPI (a fall was expected but that seems a little larger than expected to us).
BRENT TECHS: (V5) Still Looking For Weakness
- RES 4: $81.07 - 2.764 proj of the Apr 9 - 23 - May 5 price swing
- RES 3: $79.86 - 2.618 proj of the Apr 9 - 23 - May 5 price swing
- RES 2: $77.73 - High Jun 23 and a bull trigger
- RES 1: $72.83 - High Jul 30 and a key resistance
- PRICE: $66.26 @ 07:05 BST Aug 20
- SUP 1: $65.01 - Low Aug 13
- SUP 2: $60.96 - Low May 30
- SUP 3: $58.18 - Low May 5
- SUP 4: $57.74 - Low Apr 9 and a key support
Brent futures remain in a bear cycle and the contract is trading just above its recent lows. Sights are on $65.01, the Aug 13 low, where a clear break would confirm a resumption of the bear leg and pave the way for an extension lower. A clear breach would open $60.96, the May 30 low. Key short-term resistance has been defined at $72.83, the Jul 30 high. Clearance of this level would cancel a bear theme.
USDJPY TECHS: Sights Are On Trendline Support
- RES 4: 151.62 61.8% retracement of the Jan 10 - Apr 22 bear leg
- RES 3: 151.21 High Mar 28
- RES 2: 150.92 High Aug 1 and a key resistance
- RES 1: 148.52 High Aug 12
- PRICE: 147.31 @ 07:13 BST Aug 20
- SUP 1: 146.21 Low Aug 14
- SUP 2: 145.86 Low Jul 24
- SUP 3: 145.47 100-dma
- SUP 4: 145.40 50% retracement of the Apr - Aug Upleg
USDJPY remains in consolidation mode. A bearish threat is present as the pair trades closer to its recent lows. Sights are on support at 145.86, the Jul 24 low. Clearance of this level would highlight a stronger S/T reversal and strengthen the bearish engulfing signal on Aug 1. This would open 144.69, a trendline drawn from the Apr 22 low. Initial firm resistance to watch is 148.52, the Aug 12 high. A breach of it would be viewed as a bull signal.
