European Market Outlook: Post FOMC Update

MARKETS

SNAPSHOT: *** Below gives key levels of markets in the second half of the Asia-Pac session: Nikkei 225 down 67 points at 19,523.64 – ASX 200 up 23 points at 5,808.70 – Shanghai Comp. down 7.25 points at 3,261.37-JGB 10-Year future down 3 ticks at 150.14-JGB 10-Year yield up 0.3bp at 0.078% -Aussie 3-Yr future down 2 ticks at 97.92, 3-Year yield up 1.8bp at 2.031% -Aussie 10-Yr future down 4.5 ticks at 97.095, 10-Year yield up 4.5bp at 2.861% -US 10-Year future down 4+ ticks at 123.14+

US TSY/RECAP: Treasuries ended weak Thu in quiet two-way flow, morning intermittent real money selling when mkt rebounded. Tsys saw earlier FX-tied bid as US$ declined vs yen. -Tsy futures: big block buys: 14,805 TUM 2Y Tsy futures at 107-31.5 at 8:46 am ET, and one for 9,984 FVM 5Y Tsy futures at 117 – 01.25 at 8:47am ET. Tsys aided by weak crude oil and mushy US stocks. – Mkt retraces with passing of 2 Wed risk events, FOMC and Dutch elections. Heavy low delta put buys targeting Jun, Dec hikes returns. – Tsys reacted little to data amid ongoing sales by bank portfolios, real$ in 10s,30s. Tsys late block buy of 13,580 FVM 5Y Futures at 117 – 02 at 2:52pm ET; 8,000 EDU’17 at 98.54 block on offer 2:59pm ET. – Tsys late FX – tied bid (weak $) as ECB Nowotny in Handelsblatt said rate hike may be on way;depo rate cld rise before main rate. German Bund, Shatzfutrs had light sales.

JGBS: Takeaways from JGB holding data: – Q4 Foreign JGB Holding Rise Slower – Jap an Banks Trim JGBs by 12.1%, share of outstanding down to 19.4% from 20.03% end of Sept – The balance of JGBs held by the BOJ totaled Y421 trillion (39.11%) at the end of December, up 27.0% on year. It remained the biggest bond holder up from 37.90% at the end of September.

AUSSIE BONDS: Aussie bonds have moved higher in Asia-Pac trade, however they are simply retracing moves lower from SYCOM trade and are still well within their recent range. – Bond futures sold off alongside US treasuries early on, closed SYCOM at 97.90 in the 3-Year (down 4 ticks) and 97.085 in the 10-year (down 5.5 ticks) – Volumes and news flow are looking relatively thin, and quiet trade is expected after a flurry of central bank activity and market moving data this week. Yields are still up in the short and belly (1bp-4.5bp) but have come off highs since the auction.

JAPAN STOCKS: Japanese stocks gapped lower at the open, the Nikkei 225 dropping around 80 points. – Lingering JPY strength is being blamed for part of the fall, as the Japanese currency heads for its biggest gain in six weeks after a 150 gain against the USD post FOMC. Utilities are the biggest laggard on the indices, with Automakers also weighing.

OIL: WTI has seen subdued trade in Asia on Friday, but is on track for its first weekly gain since the end of February after inventory data saw surprise drawdowns earlier in the week. – Prices were also supported after Al-Falih, the Saudi Arabian oil minister, said the output cut could be extended if stockpiles do not start declining. This is despite production data showing that Saudi production actually rose in February. – WTI opened Asia at $48.79 and moved between $48.94 and $48.70; last trade at $48.87.

GOLD: Gold has seen another session of subdued price movement in Asia after a sharp rise on Wednesday post-FOMC and a more controlled rise during trade on Thursday. – Gold is on track for its first weekly gain since the end of February after the FOMC implemented their so called “dovish hike” and took some of the shine of the USD. On a 5-day basis gold is up 1.84% – Gold opened Asia at $1,226.61 and moved between $1,228.20 and $1,224.54 , last up $0.20 at $1,226.79. ).

 

Technical Analysis
BUND: (M17) Rejected Around 55-DMA

  • RES 4: 160.45 High Mar 15
  • RES 3: 160.37 55-DMA
  • RES 2: 159.92 Hourly resistance Mar 16a
  • RES 1: 159.27 Hourly resistance Mar 16
PREVIOUS CLOSE: 159.22
  • SUP 1: 158.73 Low Mar 14
  • SUP 2: 158.63 Bollinger band base
  • SUP 3: 158.26 Monthly Low Jan 26
  • SUP 4: 157.82 Low Dec 12

COMMENTARY: The pops above the 55-DMA lacked follow through with the rejection around this level reconfirming a bearish bias and immediate pressure on 158.73 lows from Tuesday. Overall bears look for closes below the weekly bull channel base (159.94) to add weight to the case for a move back to 154.81. Correcting O/S daily studies are a concern for bears. Bulls need a close above 160.45 to hint at a shift higher in focus with above the 21-DMA (161.01) confirming.

 
EUROSTOXX 50: Bulls Focused On 3524.04

  • RES 4: 3524.04 Monthly High Nov 30 2015
  • RES 3: 3455.01 Low Nov 26 2015 now resistance
  • RES 2: 3454.23 Bollinger band top
  • RES 1: 3450.1 2014 High Mar 16
PREVIOUS CLOSE: 3439.96
  • SUP 1: 3422.28 High Mar 13 now support
  • SUP 2: 3390.04 Low Mar 14
  • SUP 3: 3371.42 Low Mar 3
  • SUP 4: 3360.15 Hourly support Mar 1

COMMENTARY: The bullish bias was reconfirmed Thursday with fresh 2017 and 16 mth highs that see current focus on tests of the 3524 Nov 2015 monthly high. The Bollinger top remains the key concern for bulls with potential to limit follow through. Bears now look for a close below 3422.28 to ease immediate bullish pressure and shift focus back to layers of support 3319.20-3390.04 where key DMAs and the daily bull channel base are located.
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