Halister News

(Bloomberg) -- iTraxx Europe 5Y CDS spread may see today’s risk-relief tightening fade in favor of further widening toward 61bps, where price support meets medium-term average line; index broke last week above 58bps, which triggered a trend-reversal in credit risk, recalibrating chart bias toward near-term rise in cost for protection (see live chart here).

• iTraxx EUR 5Y generic CDS (CBIL source) at 56bps, contained inside last week’s price range of 52-59bps; CDS spread widened the most in 13 months last week
• Support directly offered by 55- DMA at 56.6bps

• Escalation of geopolitical tensions roiled credit markets with EUR 5Y CDS spread surpassing prior top at 57.61bps, which marked the high (lower top) in July; such break snapped the tightening trend characterized by lower tops
• Moreover, back-to-back close above 55-DMA resistance (~56bps) and conclusive entry into the ichimoku cloud region reinforces widening risks for days ahead
• Resistance at 58.66bps and then 59-60bps (daily cloud top readings for current week); break here exposes stronger resistance at 61.32-53bps (May lows, 38.2% Fibonacci, 100-DMA) and then 65.74-67.43bps (May 18 high, 200-DMA)
• Daily close below 52.92bps may assuage widening pressure and reposition market for narrowing trend resumption

To contact the reporter on this story: Sejul Gokal in London at sgokal1@bloomberg.net To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net Anil Varma