JGB TECHS: (H5) Fresh Lows

European natural gas rose 2.5% on Friday to EUR 47.40 to be up 5.3% last week, as cold weather, uncertainty around US energy and trade policies from the new administration drove prices higher. Withdrawals from storage in Europe have been faster this winter than last year’s and with the end of flows from Russia through the Ukraine, the region is becoming more reliant on global LNG supplies from both the US and Russia.

• There is growing pressure in Europe to reduce LNG imports from Russia, while the future of US sanctions is currently cloudy. The mild winter in Asia is helping it to access LNG from other exporters.
• US natural gas prices fell sharply on Friday driven by forecasts for warmer weather around month end. They fell 8% to $3.92 to be down 1.8% last week but still almost 8% higher on the month, which drove some profit taking. CFTC net longs rose 158.3% last week.
• Lower-48 US gas output increased 8.6% y/y as of Friday, while demand fell 23.1% y/y.
• President-elect Trump has said that he will remove the pause on licences for new LNG export facilities imposed by Biden and the ban on new drilling around much of the US coast, but this will require a vote in Congress. The start of his term is expected to drive volatility in energy markets.
• China’s December LNG import volumes fell 13.9% y/y. 

J.P. Morgan: "EUR/USD triggers another momentum divergence buy signal as it bounces from the post-payrolls retest of the 1.02 support layer. We see three resistance levels overhead. A push through the first at 1.033-1.035 would confirm a short-term trend reversal and target a move toward the 1.045-1.046 resistance zone. The higher zone and what we think will keep a ceiling over the pair through 1H25 even if the market squeezes surrounds 1.06.

The cable slide stalls, but there is little evidence that the pair is forming a lasting low despite the same oversold conditions that have been in place for weeks. The 1.1941 Sep channel marks the next potential support layer. That is followed by a large cluster of levels in the 1.18-handles. Key medium-term resistance remains at 1.2456-1.2486.

USD/JPY confirmed a short-term trend reversal with the break below pattern support near 156.00. We think a mean-reversion has scope to support levels surrounding 153.00.

AUD/USD tries to form a base pattern near the 0.617 Oct 2022 low, but continues to bearishly trade within the confines of the Sep 2024 trend channel for now. Key resistance rests in 0.63-handles. A break above that would derail the bearish trend bias. Next support sits at 0.6015-0.605." 

In post-Tokyo trade on Friday, JGB futures closed slightly higher, +3 compared to settlement levels, after US tsys finished on Friday with a modest bear-flattener. The US 2-year yield finished 5bps higher at 4.29%, while the 10-year nudged 2bps higher to 4.63%. 

• Massive -46k Mar'25 2Y futures sale triggered a broad-based reversal by midmorning, while morning headlines that incoming President Trump held a call with China President Xi elevated volatility. Descriptions of a positive tone for China/US relations boosted the Chinese Yuan.
• Reminder, that the US cash US tsy market and stock exchanges are closed today for Martin L. King Day. Also noteworthy, the Federal Reserve entered their policy Blackout at midnight Friday through January 30.
• US corporate earnings pick up in earnest this week.
• Locally, we have core machine orders on tap today for Nov, along with Nov final IP and capacity utilization. The tertiary index for Nov also prints. This comes ahead of Friday's BoJ meeting outcome, where the economic consensus and market pricing have shifted to strong hike odds.
• Closer focus will rest on Trump's upcoming inauguration, with FX, JGBs and broader market risk sentiment likely most sensitive to any tariff announcements.