COPPER TECHS: (U5) Testing Support

Weakness in broader core global FI markets is enough to drive a clean break of next support in gilt futures, in the form of the April 15 low (91.43), with the move extending to 91.11.

• Next support located at the 76.4% retracement of the April 9-May 2 rally (90.92)
• Yields now 3-4bp higher across the curve, with 2s back above 4.00% as bears look to force a more meaningful break above that level.
• Comments from President Trump re: the potential for news on the Russia-Ukraine conflict at some point today may have factored into the weakness, with wider macro and UK news flow remaining limited.
• Hawkish flow in GBP STIRs seen alongside the move, with December MPC pricing moving to the most hawkish levels seen since 11 April, showing 44bp of cuts through year-end. 1bp of cuts priced for June, 18bp through August, 24bp through September and 38bp through November, contracts 0.5-3.5bp more hawkish on the day.
• SONIA futures also register lowest levels seen in May, last little changed to -7.5.
• This helps the early gilt curve steepening unwind, with more of a parallel shift now seen. 

• RES 4: $3578.0 - 2.000 proj of the Dec 19 - Feb 24 - Feb 28 swing 
• RES 3: $3547.9 - 1.764 proj of the Feb 28 - Apr 3 - Apr 7 price swing
• RES 2: $3435.6/3500.1 - High May 7 / High Apr 22 and bull trigger
• RES 1: $3277.6/3347.5 - 20-day EMA / High May 9        
• PRICE: $3189.3.5 @ 14:31 BST May 14
• SUP 1: $3175.2 - Intraday low 
• SUP 2: $3164.5/64.3 - 50-day EMA / 61.8% of Apr 7 - Apr 22 upleg 
• SUP 3: $3100.0 - Round number support 
• SUP 4: $3071.5 - Low Apr 10

 A corrective cycle in Gold remains in play and the metal has traded lower today. A key support at $3202.0, the May 1 low has been breached. A clear break of this level would signal scope for a deeper retracement, towards $3164.3, 61.8% of the Apr 7 - Apr 22 upleg. Note that the 50-day EMA is at $3164.5 - a key support too. A breach of both points would undermine a short-term bullish theme. Initial resistance is $3277.6, the 20-day EMA.

Delivering his first speech to the Bundestag as chancellor, Friedrich Merz commits to his gov't providing “all necessary financial resources” to see Germany's military become the most powerful in Europe in conventional terms (i.e. as a non-nuclear power). Merz said that "Strength deters aggression; weakness invites aggression," as his gov't prepares to take advantage of reforms to the debt brake enacted prior to the new coalition coming to power. The gov't will now have the ability to raise defence spending as any increase above the level of 1% of GDP is now exempted from the brake. 

• While the gov't has committed to significant defence spending increases, the immediate pressure on German (and wider European) defence spending could come sooner rather than later depending on the US' position on continuing to fund the Ukrainian military and provide financial aid to Kyiv. Germany's new Foreign Minister Johann Wadephul said a short time ago that "We won't fully be able to fill the gap if the US withdraws from peacekeeping funding." Meanwhile, Ukrainian Finance Minister Sergii Marchenko has said that he sees "some kind of gap in support next year".