BUND TECHS: (Z5) Impulsive Bull Wave Extends
- RES 4: 130.80 High Jun 13 and key resistance
- RES 3: 130.41 1.382 proj of the Sep 3 - 10 - 25 price swing
- RES 2: 130.27 High Jun 20
- RES 1: 130.18 High Oct 15
- PRICE: 130.07 @ 05:56 BST Oct 16
- SUP 1: 129.44 High Sep 10
- SUP 2: 128.93 20-day EMA
- SUP 3: 128.77 50-day EMA
- SUP 4: 128.25 Low Oct 7
A bull cycle in Bund futures remains intact and the contract is holding on to its latest gains. A number of important Fibonacci retracement points have been cleared, the most recent being 130.05, 76.4% retracement of the Jun 13 - Sep 3 bear leg. This signals potential for an extension towards key resistance at 130.80, the Jun 13 high. The contract is overbought, a pullback would allow this condition to unwind. Initial key support is 128.93, the 20-day EMA.
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CHINA: Country Wrap: Shift to Equities Continues
Market Summary: Despite the positivity elsewhere, China's stocks did very little today with the Hang Seng barely up, CSI 300 down -0.38%, Shanghai down -0.10% and Shenzhen flat. The Yuan Reference Rate at 7.1027 Per USD; Estimate 7.1163 and the 10-Yr is a touch higher in yield at 1.80%
- China’s new household deposits contracted in July and August from the year before, while deposits from non-bank financial institutions surged, in a sign that people have been moving money out of their savings and into the stock market for the past two months amid record-low interest rates, according to the latest data. (source Yicai)
- China’s economy is expected to maintain steady growth in the third quarter despite weaker industrial and investment data in August, according to the National Bureau of Statistics. (source Yicai)
JGBS: Weaker & Hovering Near Cheaps, 20Y Supply Tomorrow
JGB futures are weaker, -7 compared to settlement levels, after giving up early gains as trading resumed following the long weekend.
- Japan’s tertiary industry index rose 0.5% in July from the previous month, compared with economists’ estimate of +0.1%.
- (Bloomberg) "JGB traders are leaning hawkish as Shinjiro Koizumi taps Finance Minister Kato to steer his campaign. Traders see that pairing as the stronger ticket in the LDP race, and one that could give the Bank of Japan room to raise interest rates before year-end."
- (Bloomberg) "The next pain point for bond traders may come in the five-year part of the curve, according to Goldman Sachs Group Inc. strategists. Five-year notes are particularly vulnerable in Japan and Germany, where the economic outlook is improving and the country is headed toward a more sustainable tightening cycle."
- Cash US tsys are marginally richer in today's Asia-Pac session after yesterday's modest rally.
- Cash JGBs are flat to 2bps cheaper across benchmarks. The benchmark 10-year yield is 0.8bp higher at 1.602% versus the cycle high of 1.649%.
- Swap rates are flat to 3bps higher. Swap spreads are wider.
- Tomorrow, the local calendar will feature trade balance data alongside 20-year supply.
BUND TECHS: (Z5) Pullback Appears Corrective
- 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: 128.70 @ 05:46 BST Sep 16
- 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 have pulled back from their latest 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.
