COMMODITIES: Fresh Cycle Lows in WTI Futures Reinforces Current Conditions

A second-round bid in gilts, seemingly delayed vs. wider risk-off price action, given the later open for UK gilts vs. peers, takes gilt futures to session highs of 93.25.

• No fresh headline flow, market continues to balance beta to Tsys vs. broader macro picture/UK sensitivity to tariffs.
• Dec 20 high (93.09) in futures is broken, bulls now eye Fibonacci resistance at 93.64 as the bullish corrective cycle gains more traction.
• Yields now 5-8bp lower, curve bull steepens.
• 2s below 4.15% for the first time since October.
• 10s print below 4.50% for the first time since December, looking to close the opening gap higher from December 17 (4.442% needed to close that gap).
• 2s10s nearly 2bp steeper at 33.5bp, next upside target located at the Oct ‘22 closing high 40.4bp.
• 5s30s within 0.5bp of the July ’21 closing high (~91bp).
• BoE-dated OIS extends the recent run of dovish repricing, showing ~81bp of cuts through ’25.
• ~23.5bp of cuts priced for this week’s meeting and ~46bp of easing priced through May.
• We still look for cuts in both February and May.
• Market pricing looks a lot fairer to us than it did during the hawkish repricing seen in early January (which hit an extreme of ~36bp of cuts priced through ’25).
• We have noted that we need to see much more data before providing a meaningful opinion on the path policy in H225 for some time.
• SONIA futures flat to +6.0. SFIZ5 hits the highest level seen since mid-December.

Last week’s move down in WTI futures marked an extension of the current corrective cycle. The 20-day EMA has been breached and attention is on support around the 50-day EMA, at $72.26. A clear break of the 50-day average would suggest scope for a deeper retracement. On the upside, a reversal higher would refocus attention on $79.48, the Apr 12 ‘24 high and a key resistance. A bull cycle in Gold remains in play. Last week’s extension higher resulted in a print above $2790.1, to record a fresh all-time high. The climb confirms a resumption of the primary uptrend and maintains the bullish price sequence of higher highs and higher lows. Attention is on $2817.6 next, a Fibonacci projection. The first key support to watch is $2687.5, the 50-day EMA. The 20-day EMA is at $2728.1.

• WTI Crude up $1.4 or +1.93% at $73.94
• Natural Gas up $0.23 or +7.49% at $3.27
• Gold spot down $0.81 or -0.03% at $2797.67
• Copper down $3.9 or -0.91% at $424.15
• Silver down $0.13 or -0.42% at $31.172
• Platinum down $19.05 or -1.94% at $963.39

A sharp reversal lower in the Eurostoxx 50 futures contract signals the end of the recent bull run - for now - and the start of a corrective cycle. Price has gapped lower and traded through the 20-day EMA, at 5152.76. A continuation lower would pave the way for a move towards the 50-day EMA, at 5050.12, the 50-day EMA. On the upside, key resistance and the bull trigger has been defined at 5327.00, the Jan 31 high. The S&P E-Minis contract has started the week on a bearish note. The gap lower today and a breach of support at 5948.00, the Jan 27 low, strengthens a bearish threat and cancels - for now - a recent bullish theme. An extension down would open 5892.37, a Fibonacci retracement point. Initial resistance is at 6057.75, the Jan 31 low and a gap high on the daily chart. Clearance of this level would reinstate a bullish theme.

• Japan's NIKKEI closed lower by 1052.4 pts or -2.66% at 38520.09 and the TOPIX ended 68.27 pts lower or -2.45% at 2720.39.
• Across Europe, Germany's DAX trades lower by 376.39 pts or -1.73% at 21357.03, FTSE 100 lower by 119.96 pts or -1.38% at 8553.91, CAC 40 down 132.13 pts or -1.66% at 7817.16 and Euro Stoxx 50 down 92.27 pts or -1.75% at 5193.99.
• Dow Jones mini down 601 pts or -1.34% at 44102, S&P 500 mini down 95.75 pts or -1.58% at 5972, NASDAQ mini down 386.25 pts or -1.79% at 21203.