MNI US MARKETS ANALYSIS - EUR/CHF Makes Clean Break of 1.05

US TSYS SUMMARY: Change Of Tack On European Lockdown Fears

• European lockdown fears have spilled over into Tsys with yields down 5-6bps on the day across most tenors as they more than unwind a 3bp rise in early trading. TYZ1 up +0-16 at 131-02+ on decent volumes (>450k), highest since 10 Nov.
• Fed's Waller (1045ET) and Clarida (1215ET) both of note today, speaking on economic outlook/monetary policy.
• No data aside from St Louis and NY Fed GDP Nowcasts.
• Voting on BBB delayed to today after Republican leader McCarthy delayed proceedings, with House reconvening 0800ET. Moderate Dems happy to proceed after yesterday's CBO score.
• Scheduled NY Fed purchase for TIPS 1Y-7.5Y (appr $1.775B),1010-1030ET
• Next week's Tsy auction schedule is front-end focused ahead of Thanksgiving on Thursday, with 2s, 5s and 7s on offer.

EGB/GILT SUMMARY: Renewed Lockdown Fears

European sovereign bonds have rallied sharply this morning and equities have traded lower on the back of renewed European lockdown fears.

• Austria has decided to re-enter national lockdown for vaccinated and unvaccinated people, while the German health minister has refused to rule out the possibility of another lockdown.
• Bunds have rallied with the belly of the curve slightly outperforming. Cash yields are 3-5bp lower on the day.
• It is a similar story for OATs where yields have pushed down 2-5bp and the curve is 2-3bp flatter.
• BTPs have underperformed core EGBs on the day with yields 1-3bp lower.
• Speaking in Frankfurt this morning, ECB President Christine Lagarde continues to assert that the inflation spike will be transitory and that the GC should not rush into a premature tightening of monetary policy.
• The ECB's Weidmann (outgoing) and BoE Chief Economist Huw Pill are due to speak later today.
• UK public borrowing was higher than expected in October with the headline reading ex public sector banks coming in at GBP18.8bn vs GBP14.0bn expected.
• Gilts have outperformed EGBs with cash yields down 6-7bp.
• Supply this morning came from the UK (Bills, GBP2bn).

EUROPE OPTION FLOW SUMMARY

Eurozone:
ERU3 100/99.75ps, bought for 4.75 in 2k

SX7E 17th Dec 107.5c, bought for 0.90 and 0.95 in 15k
SX7E 17th Dec 105c, bought for 1.70 in 12k was done vs 4.56k futures
SX7E 17th Dec 105c, bought for 1.00 in 1.3k.

FOREX: Lockdown Spectres Loom, EUR/CHF Makes Clean Break Lower

• The single currency trades markedly weaker against most others in G10, with the looming spectre of lockdowns weighing heavily on sentiment. Austria have become the first European nation to impose a full three-week lockdown for both the vaccinated and unvaccinated, with markets speculating that other countries could follow. The German health minister stated that Germany cannot rule out a lockdown this winter, further unsettling markets.
• EUR/USD was sold down to fresh session lows of 1.1283, but stopped short of a test on the YTD lows at 1.1264. The more major move was seen in EUR/CHF, which has now made a clean break of the 1.05 handle - again trading at the lowest levels since mid-July 2015.
• Haven currencies have been the main beneficiaries, with the USD, JPY and CHF among the best performers so far. NOK is the sole currency weaker vs. the EUR, with USD/NOK rallying to new multi-month highs of 8.9265 - last seen at end-August.
• The data slate is light Friday, with Canadian retail sales the sole release. The central bank schedule is busier, with BoE's Pill, ECB's Weidmann and Fed's Clarida among the highlights.

FX OPTIONS: Expiries for Nov19 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1375-00(E1.4bln), $1.1445-50(E581mln), $1.1500(E1.6bln)
• USD/JPY: Y114.75-76($637mln)
• EUR/GBP: Gbp0.8590-00(E1.1bln)
• USD/CAD: C$1.2650($526mln), C$1.2800-20($1.1bln)
• USD/CNY: Cny6.3700($1.1bln)

Price Signal Summary - EURCHF Cracks Key Pivot Point

• In the equity space, S&P E-minis have today delivered another all-time high - 4723.50 - but the contract has also faced some resistance. From a trend perspective, the outlook remains bullish and any short-term pullback is likely corrective in nature. Bulls eye, 4746.68 next, the 1.618 projection of Jul 19 - Aug 16 - Aug 19 price swing. Watch support at 4625.25, the Nov 10 low. EUROSTOXX 50 futures uptrend remains intact however, the contract is facing selling pressure this morning. Dips are considered corrective and the support to watch is 4307.10, the 20-day EMA. A resumption of gains would refocus attention on 4420.80, 1.382 projection of the Jul 19 - Sep 6 - Oct 6 price swing.
• In FX, EURUSD remains in a downtrend. The pair has this week traded below 1.1300, the base of a bear channel drawn from the Jun 1 high. A clear break lower and continued bearish follow through would open 1.1222, 1.618 projection of the Jan 6 - Mar 31 - May 25 price swing. The recent break in GBPUSD of 1.3412, Sep 29 low, opens 1.3334 next, 1.00 projection of the Sep 14 - 29 - Oct 20 price swing. Recent gains are considered corrective, initial resistance is at 1.3542, the 20-day EMA. USDJPY has breached resistance at 114.70, the Oct 20 high. The break higher confirms a resumption of the underlying uptrend and opens 115.51 next, the Mar 10, 2017 high. A concern for bulls is Wednesday's bearish engulfing candle. A deeper pullback would expose key support at 112.73, Sep 9 low. EURJPY is under pressure and the cross has resumed its slide. The sharp move lower has exposed 128.33, Oct 6 low and the key support at 127.93, Sep 22 low. EURCHF has cleared 1.0505, the May 14, 2020 low. The break (potentially) exposes 1.0397 next, the Jul 15, 2015 low.
• On the commodity front, Gold is consolidating but remains bullish. Attention is on $1877.7, Jun 14 high and $1903.8, Jun 8 high. WTI has traded through key short-term support at $77.23, Nov 4 low. The break suggests scope for a deeper corrective pullback towards $75.02 next, 38.2% retracement of the Aug 23 - Oct 25 rally .
• In the FI space, Bund futures have rallied sharply as bullish conditions are reinforced further. Today's breach of 171.95 - the 76.4% retracement of the Aug - Nov sell-off opens 172.48 next, Sep 9 high. Gilts also maintain a firmer tone and the recent pullback is considered corrective. The resumption of strength suggests potential for a climb towards 127.69 next, Sep 21 high. Initial support has been defined at 125.40, Nov 17 low.

EQUITIES: US Futures Roll Off as Europe Lockdowns Add Pressure

• The e-mini S&P printed a fresh alltime high in early Asia hours, inching up to print 4723.50 before momentum faded. European lockdown headlines were the catalyst, with Austria re-instating pandemic measures for both the vaccinated and unvaccinated populations. This was compounded by a parallel statement from the German health minister, who warned that a lockdown cannot be ruled out for Germany.
• As a result, European banking names have been hit hard, with the sector the worst performing on the continent. Energy and communication services are similarly weak.
• US futures remain bullish despite the pullback, with the overnight highs further supporting the current buy-the-dip mentality. Volatility could remain high across the session, with sizeable weekly index and single stock option expiries rolling off on Friday.

EQUITIES: Energy Prices Sink as Lockdowns Crimp Demand

• WTI and Brent crude futures are well offered in early Friday trade, with prices lower by over 2.5% apiece. Risk sentiment has soured across global asset markets, with equities, commodities and yields all lower headed into the NY crossover.
• European lockdown headlines were the catalyst, with Austria re-instating pandemic measures for both the vaccinated and unvaccinated populations. This was compounded by a parallel statement from the German health minister, who warned that a lockdown cannot be ruled out for Germany.
• Following the test of the 50-dma earlier this week, WTI has confirmed a break lower, with prices retreating to levels not seen since early October. The front-end of the WTI futures curve trades flatter in sympathy.
• Gold prices have benefited from the risk-off. Recent gains and a clear break of resistance at $1834.0, Sep 3 high reinforces current bullish conditions and paves the way for further strength near-term. Note too that gold has also breached $1863.3, 76.4% of the Jun - Aug sell-off. The focus is on $1877.7 next, Jun 14 high and $1903.8, Jun 8 high.