BUND TECHS: (Z5) Approaching Key Resistance

Crude has held onto most of this week’s gains trending only slightly lower during today’s APAC session. WTI is down 0.1% to $64.45/bbl after a low of $64.37 but it reached $64.67 early in the session. Brent is 0.1% lower at $68.38/bbl, close to the intraday low. The USD index is little changed ahead of the Fed decision later on Wednesday. 

• A dovish Fed is likely to be good for oil prices as rate cuts should support energy demand, as long as it doesn’t sound worried about the growth outlook.
• Oil prices have been supported this week by concerns that measures taken against Russia, including Ukrainian attacks on its energy infrastructure, and conflict in the Middle East could impact supplies.
• The EU is discussing further restrictions to reduce Russia’s energy revenues including sanctions on Chinese and Indian companies that facilitate imports from Russia. EC President von der Leyen said that the EU is looking into fast tracking the end of energy imports from Russia after the US said it needs to stop.
• Industry data showed a large US crude stock drawdown. The official EIA data is out later today and with the IEA forecasting a record market surplus in 2026, this data will be monitored for signs of a rising inventory trend.
• Later the focus is on the Fed (see MNI Fed Preview) but there are also August US housing starts/permits, August UK/euro area CPIs and the Bank of Canada decision (forecast to cut 25bp). In addition to Powell and BoC Governor Macklem, ECB President Lagarde and Board member Cipollone also speak today.

• RES 4: 130.27 High Jun 20  
• RES 3: 130.05 76.4% retracement of the Jun 13 - Sep 3 bear cycle    
• RES 2: 129.66 High Jul 22 
• RES 1: 129.09/50 High Sep 12 / High Aug 5 and a key resistance  
• PRICE: 128.78 @ 05:41 BST Sep 17
• SUP 1: 128.25 Low Sep 4      
• SUP 2: 127.61 Low Sep 3 and the bear trigger
• SUP 3: 127.46 1.00 proj of the Aug 14 - 15 - 28 price swing  
• SUP 4: 127.13 1.236 proj of the Aug 14 - 15 - 28 price swing  

Bund futures continue to trade below their recent highs. Recent gains have  resulted in a break of resistance at 128.87, the Aug 28 high and a short-term bull trigger. The climb undermines a recent bearish theme and highlights a stronger reversal. Scope is seen for an extension towards 129.50, the Aug 5 high. Key support and the bear trigger has been defined at 127.61, the Sep 3 low. The latest pullback is - for now - considered corrective.

ACGBs (YM +0.5 & XM flat) are little changed on a data-light session

• Westpac's lead index signalled slowing growth in August with the 6-month annualised rate turning negative (-0.16% down from July's +0.11%) for the first time since September 2024.
• Cash ACGBs are little changed with the AU-US 10-year yield differential at +19bps.
• The latest round of ACGB Dec-35 supply saw the weighted average yield print 0.26bp through prevailing mids (per Yieldbroker). However, today’s cover ratio fell dramatically to 2.1583x from 3.2417x. The AOFM plans to sell A$1000mn of the 1.00% 21 December 2030 bond on Friday.
• The bills strip is slightly weaker.
• RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut in September is given a 9% probability, with a cumulative 28bps of easing priced by year-end (based on an effective cash rate of 3.60%).
• Tomorrow, the local calendar will see August jobs data. Employment is forecast to rise 21k after July's +24.5k, with the unemployment rate expected to remain at 4.2%. It will also be important to monitor underemployment, the split between full-time & part-time and hours worked. The RBA is currently expected to leave rates unchanged on September 30 as it waits for Q3 CPI on October 29.