FOREX: US Dollar Maintains Constructive Tone, NZD and SEK Underperform
Feb-04 17:51
- The US dollar has traded with a supportive tone on Wednesday, assisted by bouts of risk off sentiment prompting equity weakness and oil strength. Late headlines from Axios suggesting that plans for Iran nuclear talks are collapsing has exacerbated this dynamic.
- The USD index has matched the most recent recovery highs at 97.73 and has weighed on the precious metals space, with spot gold briefly extending an impressive intraday pullback to print around $4,850 after reaching a $5,091 high overnight.
- AUD, NZD and JPY are among the worst performing majors, while the Swedish krona is at the bottom of the G10 leaderboard following some dovish innovations within the latest Riksbank minutes.
- NZDUSD has extended Wednesday’s decline to around 0.9%, slipping back below 0.6000 in the process. This follows a mixed set of Q4 employment data, failing to sustain the Kiwi’s recent bullish momentum. Support levels to note for the pair intersect at 0.5930 (20-day EMA) before more meaningful support at the prior break level around 0.5850.
- USDJPY has consolidated above 156.50 today, extending the recovery from last week’s lows to 3% at its peak. The move back above the 50-day EMA, intersecting at 155.75, undermines the recent bear theme and highlights a stronger short-term bull cycle. The next topside target is 157.72 as we approach this weekend’s election in Japan.
- The BLS have rescheduled the December JOLTS for Thursday, which will be the data highlight alongside both the BOE and ECB decisions.
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BONDS: EGBs-GILTS CASH CLOSE: Bull Flatter Ahead Of FR, DE Inflation
Jan-05 17:29
European curves bull flattened Monday.
- Cash bonds posted a fairly indifferent start to the week's trade, in spite of weekend geopolitical volatility after the US's removal of the Venezuelan president.
- Early gains in core bonds on softer oil prices were tempered by a rise in equities/risk appetite and a rebound in oil, but ultimately yields resolved to the downside.
- A soft US ISM Manufacturing reading in mid-afternoon didn't have much immediate impact but help drag Treasury yields lower, helping EGBs and Gilts consolidate gains into the cash close.
- On the day, both the UK and German curves bull flattened, while periphery / semi-core EGB spreads tightened modestly.
- Tuesday's calendar highlight is flash December inflation data from Germany and France, both of which are expected to show some moderation - MNI's preview is here.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 1.2bps at 2.127%, 5-Yr is down 2.3bps at 2.453%, 10-Yr is down 3bps at 2.87%, and 30-Yr is down 3.4bps at 3.507%.
- UK: The 2-Yr yield is down 1.5bps at 3.72%, 5-Yr is down 2.3bps at 3.938%, 10-Yr is down 3.1bps at 4.506%, and 30-Yr is down 2.7bps at 5.246%.
- Italian BTP spread down 1.4bps at 69.9bps / Spanish down 0.8bps at 43bps
US 10YR FUTURE TECHS: (H6) Bear Threat Remains Present
Jan-05 17:20
- RES 4: 113-07 High Dec 3
- RES 3: 113-00+ 61.8% retracement of the Nov 25 - Dec 10 bear leg
- RES 2: 112-25+ high Dec 30 / 31
- RES 1: 112-20 50 -day EMA
- PRICE: 112-14+ @ 17:17 GMT Jan 5
- SUP 1: 112-01+/111-29 Low Dec 23 / 10 and the bear trigger
- SUP 2: 111-19 1.236 proj of the Oct 17 - Nov 5 - 25 price swing
- SUP 3: 111-11 1.382 proj of the Oct 17 - Nov 5 - 25 price swing
- SUP 4: 111-00 Round number support
Treasuries continue to trade above key support at 111-29, the Dec 10 low and a bear trigger. The trend theme remains bearish and a break of 111-29 would confirm a resumption of the bear cycle. This would open 111-19 initially, a Fibonacci projection. Key short-term resistance has been defined at 112-31, the Dec 18 high, where a break would undermine a bear theme and signal scope for a stronger recovery instead.
US TSY OPTIONS: Upside Call Buyer Resumes Position Building
Jan-05 17:03
Covered call buyer picks up where they left off prior to the holiday's:
- +50,000 TYH6 114 calls, 14 ref 112-15 (exp 2/20) total volume over 64,900 (open interest 56,410 coming into the session).
- +10,000 TYG6/TYH6 113 call spds 17
- +20,000 TYG6 114 calls, 3 vs. 112-12.5 to -13
- +5,000 TYG6 114 calls, 2 ref 112-12
