Technicals

Treasuries Running out of Steam as 119 Resistance Looms

The benchmark 10-year Treasury note has risen for a fourth consecutive session Tuesday; but momentum there is a notable lack of momentum behind this short-term trend. Without the necessary conviction in price action, this market may find it difficult to overtake what is currently a triple top at 118-26/30. If the bulls indeed cave at the technical threshold, it would work to confirm the descending trend from April’s highs.

The 10-year Gilt has managed to bounce before plunging the one-year lows set back in July. However, the technical developments of the past few months are still painting a bearish picture. A head-and-shoulders formation is unmistakable with a shoulder at the 118.85 pivot. A controlled advance is probable as bulls work to retrace the sharp plunge last week; but maintaining momentum is will be more difficult.

Bunds have worked their way into congestion these past four months; but there is still a discernable bullish bias to the chop. Tuesday’s advance extended the bounce from the established rising trend of major swing lows. How long this climb lasts will depend on how confident bulls are when they reach 122.00/25.

Japanese government bonds have extended their five-week decline by testing lows not seen since mid-August. We are coming upon a moderate level of technical support in the confluence of a pivot and 38.2 percent Fib retracement at 137.00/25. However, it is interesting to note that market activity continues to settle from the 2008 highs. It will be far more difficult to produce breakouts with such staid markets.

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