BOBL TECHS: (U5) Gains Considered Corrective

• RES 4: 131.95 High Jun 13 and the bull trigger
• RES 3: 131.33 High Jun 20  
• RES 2: 130.76 High Jul 4
• RES 1: 130.48 High Jul 21 
• PRICE: 130.47 @ 05:49 BST Jul 22
• SUP 1: 129.73/08 Low Jul 21 / 14 
• SUP 2: 128.97 Low May 14 and a reversal trigger
• SUP 3: 128.90 Low Apr 10 
• SUP 4: 128.40 Low Apr 9

Bund futures traded higher Monday. The climb resulted in a move through resistance around the 50-day EMA, at 131.22. A clear break of the EMA would undermine the recent bear theme and highlight a possible reversal. This would open 130.76 initially, the Jul 4 high. Clearance of this level would strengthen a bullish theme. A key support and the bear trigger has been defined at 129.08, the Jul 14 low.

Crude continued its pattern of declines while trading in a narrow range. WTI is down 1.0% to $66.51/bbl but with the August contract expiring today volumes have been thin. Brent is also 1.0% lower at $68.51/bbl, close to the intraday trough. The market continues to worry about the impact of higher US tariffs and trading partner retaliation on global energy demand. The USD index is slightly higher after falling 0.5% on Monday. 

• Trade negotiations with the US continue ahead of the August 1 deadline. Japan’s negotiator Akazawa met with US Commerce Secretary Lutnick for more than 2 hours to formulate a deal that would profit both countries, according to Reuters. Talks between the EU and US have been difficult and are ongoing but President Trump is threatening the region with 30% duties.
• Ukraine and Russia are scheduled to meet for a third time in Turkey on Wednesday to negotiate a truce. The two sides have been unable to find common ground. Trump is warning that if a ceasefire isn’t agreed within 50 days that there will be additional tariffs on countries who buy Russian crude, which could impact trade talks with China and India. The situation is difficult, as Russia and purchasers have effectively found ways around sanctions and reducing Russian oil exports could boost prices, which would be unpopular in the US.
• Later the Fed’s Powell will make opening remarks at a regulatory conference and Bowman appears too but with the blackout having begun ahead of the July 30 decision, monetary policy is unlikely to be covered. US July Philly and Richmond Fed indices, and the ECB’s bank lending survey are released. BoE Governor Bailey testifies on financial stability.

JGB futures are stronger and at highs, ~+70 compared to overnight closing levels on Friday.

• Today, the local calendar has been empty.
• "JAPAN'S KATO: UPPER HOUSE ELECTION WAS TOUGH RESULT FOR LDP, WILL TAKE OUTCOME OF UPPER HOUSE ELECTION SERIOUSLY, GOVERNMENT SEES CONSUMPTION TAX CUT AS INAPPROPRIATE" - BBG
• "JAPAN TARIFF NEGOTIATOR AKAZAWA, U.S. COMMERCE SECRETARY LUTNICK MET FOR OVER 2 HOURS IN WASHINGTON ON MONDAY, JAPAN GOVT SAYS" RTRS
• Cash US tsys are slightly stronger in today's Asia-Pac session after yesterday's rally.
• Cash JGBs have twist-steepened, with yields 4bps lower to 3bps higher across benchmarks. The benchmark 40-year yield is 3.4bps higher at 3.405% versus the cycle high of 3.692%.
• (Bloomberg) -- Overseas investors ramped up purchases of Japanese government bonds last month, pushing their quarterly acquisitions of super-long tenors to a record, according to data released by the Japan Securities Dealers Association on Tuesday.
• Swaps have bull-flattened, with rates 2-3bps lower. Swap spreads are tighter.
• Tomorrow, the local calendar will see a speech by BOJ Deputy Governor Uchida in Kochi alongside Machine Tool Orders data and 40-year supply.