BUND TECHS: (U5) Resistance Remains Intact

JGB futures are stronger and hovering near session bests, +44 compared to the settlement levels.

• Cash US tsys are little changed in today's Asia-Pac session. 
• Cash JGBs are 1-5bps richer across benchmarks, with the futures-linked 7-year outperforming. The benchmark 10-year yield is 4.5bps lower at 1.560% versus the cycle high of 1.616%.
• " Japan's central bank might signal a shift toward a less dovish stance, BofA economists say in a note. The Bank of Japan is widely expected to maintain its policy rate at 0.5% at the monetary policy meeting this week. But it will likely strike a less dovish tone, given the recent trade deal Japan struck with the U.S., they say. The agreement reduces a big uncertainty the BOJ had pointed to as a reason for holding off on tightening policy.” (BBG)
• We expect no policy changes at this week's BOJ policy meeting. The market's focus will be on the forecast changes in the BOJ's Outlook Report and the tone of the Governor's press conference regarding future rate hikes.
• Swap rates are 1-3bps lower, with a steepening bias. Swap spreads are mixed.
• Tomorrow, the local calendar will be empty apart from 2-year supply.

• RES 4: 131.33 High Jun 20
• RES 3: 130.85 61.8% retracement of the Jun 13 - Jul 14 bear leg 
• RES 2: 130.19/76 50-day EMA / High Jul 22
• RES 1: 129.97 20-day EMA
• PRICE: 129.27 @ 05:43 BST Jul 28
• SUP 1: 128.84 Low Jul 25 
• SUP 2: 128.40 Low Apr 9
• SUP 3: 128.19 Low Mar 27 (cont) 
• SUP 4: 127.83 76.4% retracement of the Mar 11 - Apr 7 bull leg (cont)  

Bund futures tradies lower Friday, extending the reversal from the Jul 22 high. The move down has resulted in a print below key support and a bear trigger, at 129.08, the Jul 14 low. The 129.00 handle represents a key area of support and a clear break of it would represent an important bearish development. It marks the base of a 3.5-month range. A resumption of weakness would open 128.40, the Apr 9 low.  Initial resistance to watch is 129.97, the 20-day EMA.

ACGBs (YM +0.5 & XM +0.5) are little changed.

• Cash US tsys are little changed in today's Asia-Pac session. Today's US calendar will see Dallas Fed Manf. Activity.
• The focus of this week will be Wednesday's Q2 CPI data, which is expected to show the underlying trimmed mean measure making further progress towards the band mid-point of 2.5%. Bloomberg consensus is forecasting a 0.7% q/q rise, bringing the annual rate to 2.7% after 0.7% & 2.9% in Q1. This is slightly higher than the RBA's May Q2 forecast of 2.6%. Services developments will also be monitored. The RBA is expected to cut rates 25bp on August 12.
• Cash ACGBs are unchanged with the AU-US 10-year yield differential at -5bps.
• The bills strip is slightly weaker, with pricing flat to -2.
• RBA-dated OIS pricing is slightly firmer across meetings today. A 25bp rate cut in August is given a 91% probability, with a cumulative 57bps of easing priced by year-end (based on an effective cash rate of 3.84%).
• This week, the AOFM plans to sell A$1000mn of the 2.25% 21 May 2028 bond tomorrow and A$1200mn of the 2.75% 21 June 2035 bond on Friday.