USDJPY TECHS: Bear Cycle Extends
- RES 4: 158.87 High Jan 10 and the bull trigger
- RES 3: 158.08 High Jan 15
- RES 2: 156.75 High Jan 23 and a key resistance
- RES 1: 155.59 20-day EMA
- PRICE: 152.17 @ 16:06 GMT Feb 5
- SUP 1: 152.12 Low Feb 5
- SUP 2: 151.81 Low Dec 12
- SUP 3: 151.72 2.0% 10-dma envelope
- SUP 4: 151.06 76.4% retracement of the Dec 3 - Jan 10 bull leg
USDJPY traded lower again Wednesday, resulting in a break of key short-term support at both 153.72, the Jan 27 low, as well as 152.55, a Fibonacci retracement. This expands the downside range, with the pair narrowing the proximity with the December low. 151.06 marks the next key level. On the upside, initial firm resistance is seen at 155.59, the 20-day EMA. Key short-term resistance has been defined at 156.75, the Jan 23 high, where a break would highlight a bullish reversal.
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BONDS: EGBs-GILTS CASH CLOSE: Inflation Uptick Sees Bunds Underperform
Core European yields rose to start the week, with Bunds underperforming Gilts Monday.
- State-level German data in the morning correctly pointed to an upside surprise in the preliminary December national level inflation release in the afternoon.
- Having apparently confirmed the trend seen in solid Spanish and Portuguese data last week, inflation breakevens rose (EUR 5Y5Y swap +2.9bp to the highest since mid-Nov at 2.08%), paring ECB cut pricing. Final Eurozone PMIs for December also saw upward revisions and firmer price pressures.
- Supply concerns also weighed on core FI, with UK, Austrian and German auctions Tuesday alongside an expected Belgian 10Y syndication.
- The German curve bear flattened, with the UK's lightly bear steepening.
- Periphery/semi-core spreads tightened, with OATs slightly outperforming in a partial reversal of late December's sell-off.
- Tuesday's early highlights include inflation data from Switzerland, France, Italy, and the Eurozone.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 3.3bps at 2.194%, 5-Yr is up 3.3bps at 2.263%, 10-Yr is up 2.2bps at 2.447%, and 30-Yr is up 1bps at 2.663%.
- UK: The 2-Yr yield is up 1.1bps at 4.433%, 5-Yr is up 1.6bps at 4.401%, 10-Yr is up 1.7bps at 4.61%, and 30-Yr is up 2.3bps at 5.179%.
- Italian BTP spread down 3.8bps at 112.5bps / French OAT down 5.0bps at 81.1bps
GBPUSD TECHS: Bearish Trend Sequence Remains Intact
- RES 4: 1.2874 High Nov 12
- RES 3: 1.2811 High Dec 6 and key resistance
- RES 2: 1.2698 50-day EMA
- RES 1: 1.2562 20-day EMA
- PRICE: 1.2518 @ 18:29 GMT Jan 6
- SUP 1: 1.2353 Low Jan 2
- SUP 2: 1.2300 Low Apr 22 2024
- SUP 3: 1.2277 2.0% 10-dma envelope
- SUP 4: 1.2266 Low Nov 14 2023
The sharp sell-off in GBPUSD last Thursday confirmed a resumption of the medium-term downtrend. The move lower maintains the bearish price sequence of lower lows and lower highs and note that moving average studies are in a bear-mode position, highlighting a clear downtrend. Monday’s strong gains are - for now - considered corrective. Initial firm resistance is at 1.2562, the 20-day EMA. The bear trigger is 1.2353, the Jan 2 low.
STIR FUTURES: Buyer Red Mar'26 SOFR Includes Block
- +17,000 SFRH6 96.015 (-0.015) Block at 1402:11ET (DV01 $425k) with additional +20,000 on screen in the last few minutes. The Red Mar'26 trade 96.02 last
