JGB TECHS: (U5) Returns Toward Lows

• RES 3: 147.74 - High Jan 15 and bull trigger (cont)
• RES 2: 146.53 - High Aug 6 
• RES 1: 141.48/142.95 - High May 2 / High Apr 7
• PRICE: 139.01 @ 16:09 GMT Jun 03
• SUP 1: 138.54 - Low May 22
• SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg   
• SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg

JGBs have rallied off recent lows, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal. 

Oil prices rose again on Tuesday as the market was more optimistic on supply as output impacted by fires in Canada almost equalled OPEC’s planned July increase. With the focus on Friday’s US payroll data, the better-than-expected vacancy data also added to the rally. 

• WTI rose 1.3% yesterday to $63.34/bbl to be up 4.2% this week. It reached a high of $63.89 after a low of $62.40. It is currently around $63.42. It traded above the 50-day EMA at $62.47 for most of the day and if held opens up key resistance at $65.82. A bear threat remains with the bear trigger at $54.33.
• Brent is up 1.5% to $65.62 to be 4.5% higher this week, breaching the 50-day EMA at $65.28. It made a high of $65.95 following a low of $64.51. Recent gains still appear corrective but a clear break of $65.28 would signal a stronger bull cycle and open $67.73. The bear trigger is at $57.78.
• Fires in Alberta have threatened oil production resulting in around 350kbd or 7% of Canadian output being shut down, according to Bloomberg. This is close to the 411kbd increase OPEC agreed last weekend. The closures impact heavy crude which is currently in short supply due to seasonal maintenance. It is hoped that rain will help bring the fires under control.
• Bloomberg reported that there was a crude destocking of 3.289mn barrels last week, according to people familiar with the API data. Product inventories rose strongly with gasoline up 4.73mn and distillate +761k barrels. The official EIA data is out Wednesday. 

The NZD had a range overnight of 0.5988 - 0.6012, Asia is trading around 0.6000. The NZD has found some demand just below the 0.6000 area as the US stock market pushed higher again, and the USD bounced.

• Milk Price Auction Sees Second Consecutive Drop : Overnight, the fortnightly whole milk powder auction saw prices fall a further 3.7% versus the prior result. From $4332, we are now back at $4173. This is the second consecutive decline for the auction result, but by recent standards we are still elevated from an historical standpoint.
• Bloomberg - “Donald Trump signed a directive formally raising steel and aluminum tariffs to 50% from 25% as of June 4, the White House said. Scott Bessent said Beijing has a choice on whether it’s a dependable partner, reiterating that China must shift to a more consumption-led economy.”
• The NZD held up ok with demand seen just below 0.6000, this while the USD continued to retrace higher overnight. Can it have another look back above 0.6050 this week, or will the market wait to first see what NFP has to say.
• The support back towards 0.5850 has held very well, and while this continues to hold expect buyers to be around on dips. A clear break above 0.6050 is needed to provide the spark for the next leg higher.
• CFTC Data showed Asset managers maintaining their shorts, while the leveraged community pared back only a little of the decent short they had initiated the week before.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5900(NZD401m). Upcoming Close Strikes : 0.5990(NZD390m June 5), 0.5895(NZD305m June 5)

• Data/Event : Cotality Home Value

  Fig 1: NZD/USD Spot Daily Chart

  

  Source: MNI - Market News/Bloomberg