OUTLOOK: Price Signal Summary - Recent Pullback In Gilts Considered Corrective

In the FI space, Bund futures traded lower Tuesday resulting in a break of the 20-day EMA, at 134.14. Short-term weakness appears to be corrective and this is allowing the recent overbought condition to unwind. The next support to watch lies at 133.34, the 50-day EMA. A break of this average would highlight scope for a deeper retracement. For bulls, a reversal higher would refocus attention on 136.45, 76.4% of the Dec 27 - May 31 downleg (cont). First resistance is 135.17, the Aug 14 high.

Gilt futures traded lower Tuesday and this resulted in a breach of support at 98.79, the Aug 12 low. The break lower highlights scope for a deeper retracement near-term that opens 98.37, a 1.236 projection of the Aug 14 - 16 - 22 price swing. The trend condition remains up and the latest pullback appears to be a correction. A reversal higher would signal the end of the corrective phase. First key resistance to monitor is 99.85, Aug 22 high.