BONDS: Nancy Pelosi and Taiwan at the forefront
- Early price action has been led by the latest China headlines regarding Nancy Pelosi potential trip to Taiwan.EU and US Equities are on the on the back foot, following the latest Chinese headlines.
- "Taiwan faces disastrous consequences of US action", talking about Nancy Pelosi's potential visit to Taiwan.
- EGBs and Bund initially rallied, and the German 10yr Yield broke below the 0.70% level, and printed a 0.680% low today.
- Futures have since reversed the early moves, but are still deep in green territory.
- Although flat so far today, Portugal/Bund spread still trend to its tightest level since 21st April.
- Next support will be seen at 96.04, now trading at 99.5bps.
- Gilt has traded in line with Germany, and the Gilt/Bund spread trades 0.8bp tighter.
- US Treasuries have mostly traded close to Europe, but underperform somewhat.
- US 10yr Yield tested the lowest level since 5th April, but is off the lows inline with Europe.
- Looking ahead, most of the focus is on Nancy's Pelosi potential visit to Taiwan.
- There are no tier 1 data for the session, speakers, include Fed Evans, Mester and Bullard.
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Historical bullets
JGB TECHS: (U2) Solid Bounce Into the Close
- RES 3: 151.13 - High Mar 3
- RES 2: 150.44 - High Mar 14
- RES 1: 150.14 - High Apr 1 and key resistance
- PRICE: 149.30 @ 16:43 BST Jul 1
- SUP 1: 147.15 - Low Jun 14
- SUP 2: 147.08 - 3.0% Lower Bollinger Band
- SUP 3: 146.82 - Low Jul 14 2015
JGBs extended the near-term corrective bounce into the Friday close, persisting with the recovery off last week’s lows. The broader outlook, however, remains negative after JGB futures showed below the 1.0% 10-dma envelope for the first time since the depths of the COVID-19 crisis, touching 147.15 on the pull lower. The next downside level crosses at 147.08, the 3.0% lower Bollinger Band ahead of 146.82 - the low from July 14th 2015.
USDCAD TECHS: Bullish Price Structure
- RES 4: 1.3192 1.00 proj of the Apr 5 - May 12 - Jun 8 price swing
- RES 3: 1.3113 High Nov 23 2020
- RES 2: 1.3079 High May 17 and a bull trigger
- RES 1: 1.3017 High Jun 23
- PRICE: 1.2918 @ 16:59 BST Jul 1
- SUP 1: 1.2819/2807 Low Jun 28 / 50-day EMA
- SUP 2: 1.2732 61.8% retracement of the Jun 8 - 17 rally
- SUP 3: 1.2681 Low Jun 10
- SUP 4: 1.2518 Low Jun 8 and key support
USDCAD outlook remains bullish and the pair is trading above this week’s low. The recent corrective cycle appears to have stalled at Tuesday’s low of 1.2819. Looking at Japanese candle patterns, Tuesday is a doji pattern and this points to a short-term bullish reversal. A stronger recovery would refocus attention on resistance at 1.3079 the Jun 17 and a bull trigger. Firm support lies at 1.2807, the 50-day EMA.
AUDUSD TECHS: Clears Key Support
- RES 4: 0.7202 High Jun 9
- RES 3: 0.7138 High Jun 10
- RES 2: 0.7069 High Jun 16 and a key short-term resistance
- RES 1: 0.6979 20-day EMA
- PRICE: 0.6794 @ 16:56 BST Jul 1
- SUP 1: 0.6764 Low Jul 1
- SUP 2: 0.6759, 50.0% retracement of the Mar ‘20 - Feb ‘ 21 bull cycle
- SUP 3: 0.6685 High Mar 9 2020
- SUP 4: 0.6647 0.764 proj of the Apr 5 - May 12 - Jun 3 price swing
AUDUSD is softer and the pair has traded below its key short-term support at 0.6829, the May 12 low. The break of this support confirms a resumption of the downtrend that started in February 2021 and maintains a broader bearish price sequence of lower lows and lower highs. The move lower signals scope for weakness towards 0.6759, the 50.0% retracement of the Mar ‘20 - Feb ‘ 21 bull cycle.
