CHILE: Downtrend In USDCLP Still Intact

• In the equity space, recent weakness in the S&P E-Minis contract has resulted in a breach of a number of important supports; 6014.00, the Feb 10 low, and 5935.50, the Feb 3 low. The sharp move down signals scope for a deeper retracement and has exposed the next key support at 5809.00, the Jan 13 low. The contract is trading higher today, extending Friday’s bounce. Initial firm resistance to watch is 6038.96, the 50-day EMA.
• The trend condition in the EUROSTOXX 50 futures contract remains bullish and - for now - the latest shallow retracement appears corrective. The contract has pierced support at the 20-day EMA, at 5417.56. A clear break of this average would signal scope for a deeper retracement - note that the 50-day EMA lies at 5266.18. The EMA represents a key area of support. For bulls, a stronger resumption of gains would open 5574.57 next, a 2.382 projection of the Nov 21 - Dec 9 - 20 ‘24 price swing.

As mentioned above, yields across the US and Germany are inching to the session's best levels, and the pre-Eurozone CPI fade in the USD Index is sticking. As a result, USD/JPY is nearing the overnight highs - but more consequentially EUR/JPY is ripping to show above Y157.50, amounting to a 1% rally off lows.

• Today's price action extends a phase of S/T volatility for the cross: one-week realised vols for EURJPY are now just below the early February highs that coincided with the first wave of CA/MX tariff threats from the White House.
• As a result, EUR/JPY is nearing 157.99, the 50% retracement for the downleg posted off the mid-February highs - clearance above which opens the 157.97 and 159.65 20-day/50-day EMAs and key short-term resistance.

Fresh cycle lows for Bund ASWs (vs. both 3- & 6-month Euribor) seemingly factor into the move detailed above as well, as markets react to the potential for more forceful German fiscal spending (German cash 5s30s curve over 3bp steeper on the day, while Bund & Buxl ASWs are ~2bp tighter).

• Cross-market, signs of increased German spending are being taken as a positive for the EUR in FX trade and European equities, with the big European defence names outperforming against this backdrop.