Fixed Income Markets, Technicals

Treasuries Extend Their Most Aggressive Rally Since January

Treasury Note (10-Year)

A bullish reversal met momentum through the end of last week to drive the benchmark 10-year Treasury Note futures contract from another successful confirmation of the rising trend that began back in July. However, if it were not for the much more prominent 61.8% Fib retracement of the July 2007 to December 2008 bull wave, this questionable technical level would likely give way. Trendlines have consistently failed over the past few months thanks to excessive volatility and periods of extraordinary correlation across the different security groups. The general, descending trend developed through price action since the turn of the year is still in play; but should the market drive us back above the 50% Fib of the aforementioned wave at 117-14, momentum will likely shift along with direction.

UK Gilt (10-Year)

Just a few weeks ago, it seemed the 10-year Gilt marked a turning point with a confirmed break below the 116.50 range low that had held back the bearish tide for the entire year. However, since then, we have seen the 50% Fib of the last long-term bull wave (June 2008 to March 2009) at 115.20 hold; and a subsequent reversal bring an abrupt end to the steady, bearish trend channel that has defined price action since the first quarter reversal from record highs. Currently, resistance is holding momentum back around 119.75/95. Fib resistance meets a notable pivot for the year and 27-week SMA (half a year) to define the next breakout level or insurmountable ceiling.

German Bund (10-Year)

The usually choppy and volatile price action behind the benchmark bund has finally given way to a very clear range. The bullish reversal that really took off last week has lost momentum at just the correct momentum from a technical perspective. Should the doji that has developed with Monday’s close (following two, aggressively bullish candles through the end of last week) maintains the 122.30/50 high, it would seem a genuine triple top. However, given the consistency of this new range high and the triple bottom / 50% Fib confluence at 120, we are looking at an unnatural position for this instrument to be in. A breakout is likely to come soon; and it won’t likely be a simple breech and follow through.

Japanese Government Bond (10-Year)

The benchmark JGB contract is enjoying its sharpest rally since the market meltdown back in October. Scaling more than 120 points in a mere three sessions, the bulls will likely find themselves winded very soon. And, when momentum does finally give way, there is ample resistance just ahead at 139.00 and then 139.40. So far, there has not yet been a clear signal that the rally is ready to pause; so confirmation is imperative to see whether 139 will lead to a turn or will be the next victim in the most aggressive swing since March.

Written by: John Kicklighter, Strategist for CFDTrading.com
Questions? Comments? You can send them to jkicklighter@cfdtrading.com