BRENT TECHS: (V5) Still Looking For Weakness

• RES 4: $81.12 - 3.000 proj of the Apr 9 - 23 - May 5 price swing
• RES 3: $80.00 - Psychological round number
• RES 2: $77.75 - 2.618 proj of the Apr 9 - 23 - May 5 price swing
• RES 1: $69.41/75.98 - 50.0% of the Jun 23-24 range / High Jun 23  
• PRICE: $65.35 @ 07:07 BST Jul 23 
• SUP 1: $65.68/62.84 - 50-day EMA / Low Jun 24 
• SUP 2: $58.17 - Low May 30
• SUP 3: $54.66 - Low May 5
• SUP 4: $54.01 - Low Apr 9 and a key support  

A bearish theme in WTI futures remains intact and the recovery since Jun 24 still appears corrective. The sharp reversal from the Jun 23 high continues to highlight scope for an extension lower. Support to watch is the 50-day EMA, at $65.68. The average has been pierced, a clear break of it would expose $58.17, the May 30 low. Initial resistance to monitor is $69.41, the 50.0% retracement of the Jun 23 - 24 high-low range.

Bund futures were biased lower overnight and have erased all of yesterday’s gains, currently -34 ticks at 130.40. For now, futures remain above the 50-day EMA, which was pierced on Monday. This has undermined a bearish theme and highlights a possible reversal. Initial support is 129.73 (July 21 low), followed by 129.08 (July 14 low). 

• Developments in Japan have been the primary source of pressure for FI markets overnight:
  • Equity markets are rallying on news of a US-Japan trade deal (Nikkei almost +4%, Eurostoxx 50 futures +1.2%). The deal reduces the tariff on Japanese goods to 15% (from the previous threat of 25%) in exchange for USD550bln of investments into the US. This has increased optimism for further deals with the likes of the EU and China.
  • The long-end of the JGB curve remains under pressure following a weak 40-year auction. 40-year yields are up 8bps on the session.
  • Reports that Japanese PM Ishiba is set to resign this weekend may have provided further tailwinds to equities and upward pressure on yields, amidst hopes for more fiscal spending in Japan. 10-year JGB yields have reached their highest since 2011 at 1.596%.
• EGB spreads to Bunds unsurprisingly look set to open tighter given the support for risk assets. BTP futures are down 21 ticks at 121.18 at typing.
• Germany will return to the market today with E5bln of the 10-year 2.60% Aug-35 Bund on offer.
• Today’s data calendar includes Eurozone flash July consumer confidence at 1500BST.
• Broader focus remains on tomorrow’s flash PMIs and the ECB decision (MNI preview here )

• RES 4: $85.00 - Round number resistance 
• RES 3: $81.99 - 2.764 proj of the Apr 9 - 23 - May 5 price swing
• RES 2: $80.72 - 2.618 proj of the Apr 9 - 23 - May 5 price swing
• RES 1: $72.66/79.40 - 50.0% of the Jun 23-30 range / High Jun 23
• PRICE: $68.78 @ 07:00 BST Jul 23
• SUP 1: $65.92 - Low Jun 30 
• SUP 2: $61.39 - Low May 30
• SUP 3: $58.00 - Low May 5
• SUP 4: $57.70 - Low Apr 9 and a key support   

The technical set-up in Brent futures is unchanged. A bearish theme is present and the July recovery appears corrective. The sell-off on Jun 23 continues to highlight a bearish threat. Recent weakness has resulted in a print below the 50-day EMA and note too that $66.17, 61.8% of the May 5 - Jun 23 bull leg, has been pierced. A resumption of the bear leg would expose $61.39, May 30 low. Initial resistance to watch is $72.66, a Fibonacci point.