PERU: USDPEN Consolidates Break Below 3.70, BBVA Bullish on Sol
Feb-19 11:52
- The Peruvian Sol rose to a 9-month high this week, with technical factors assisting the latest rally. USDPEN broke below a cluster of daily lows around 3.70 which prompted some additional downside momentum for the pair.
- BBVA believe this leaves room for the PEN to rally further towards the 3.50-3.60 range amid stretched long USD positioning from offshores that could start to unwind. The add that multiple fundamental factors are supporting the PEN, including a strong trade balance and a continued reversion in inflation (headline, core and expectations), combined with a more cautious BCRP that is near its real neutral policy rate.
- For reference, the central bank announced that Peru's trade balance reached a surplus of US$23.821 billion in 2024, higher than the figure recorded in 2023 (US$17.678 billion). "This figure is also 3.5 times higher than that obtained in 2019, the pre-pandemic year," the issuing body underlined. The BCRP stated that exports grew 12.4% in 2024.
- BBVA add that technical support for the PEN includes strong local bond inflows into Peru, while incoming tax flows are an additional positive amid a very profitable 2024 for the mining sector. Together, these factors should provide a potent squeeze to short PEN NDF positioning from offshores.
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US TSYS: Modestly Cheaper To Start Inauguration Day
Jan-20 11:45
- Cash Treasuries are closed today for Martin Luther King Day whilst futures markets are set for an early close at 1300ET.
- Focus is firmly on Trump’s inauguration, due to be sworn in at 1200ET and with eyes on executive orders that may follow. See our political risk team’s schedule for the day: https://media.marketnews.com/MNIPOLRISK_Inauguration_Day_Schedule_07a11994f9.pdf
- TYH5 pushed through Friday’s low overnight with 108-10 (currently 108-12+, -05) but still carries some of the impact from a dovish Waller on Thu and all of Wednesday’s CPI impact. Cumulative volumes are unsurprisingly extremely thin, at 165k.
- Gains are considered corrective against a medium-term bearish trend condition. Resistance is seen at 108-27+ (Jan 17 high) whilst support is seen at 108-00 (Jan 13 low).
- Fed Funds futures meanwhile price a cumulative 7.5bp of cuts for Mar, 13bp for May, 23bp for Jun, 26bp for Jul and 38bp for 2025 (the latter vs 32bp pre-CPI).
EURIBOR OPTIONS: Large Call Condor is bought for more
Jan-20 11:45
Large Condor in Euribor is still trading, multiple clips:
- ERM5 98.125/98.25/98.375/98.50c condor, bought for half in ~40k.
OUTLOOK: Price Signal Summary - Resistance In Gold Remains Exposed
Jan-20 11:42
- On the commodity front, the recent climb in Gold appears corrective - for now. However, the yellow metal continues to hold on to its latest gains and scope is seen for a continuation higher near-term. The stronger recovery exposes $2726.2, the Dec 12 high and an important resistance. Clearance of this level would be a bullish development. On the downside, a reversal lower would expose $2583.6, the Dec 19 low. Initial support is at $2649.0, the 50-day EMA.
- In the oil space, the trend structure in WTI futures remains bullish and the Jan 15 rally reinforces current conditions. The recent strong impulsive climb has resulted in a breach of $75.91, the Oct 8 high. Attention is on $79.48, the Apr 12 ‘24 high. A clear break of this hurdle would strengthen the bullish theme and open 80.63, a Fibonacci projection. On the downside, a reversal lower would expose the 20-day EMA, at $73.89, a key short-term support.
