Technicals

Treasuries Continue Northern Journey, German Bunds Weaken

Treasury 10 year notes pared yesterday’s decline ahead of a report that will show U.S. economic growth moderated and inflation advanced at the slowest pace on record.

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

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

Treasuries’ Pullback Struggling for Momentum

Treasury Note (10-Year)

Treasury yields have picked up over the past two weeks; but the bearish pull in 10-year Treasury Note futures has been relatively constrained when compared to the performance of the US dollar or Dow. A higher time frame chart shows there is a bullish underlying trend still in place starting with the trendline that began in late June of 2008 and has since notched confirmation in October and June of this year. However, this is a relatively loose level. Therefore, if there is a break below the 115-27 range low that has stood as support for the entire month (and offers a minor potential head-and-shoulders formation), there could be a short-term break and run to the next level of support at 114. A rebound on the other hand would initially target 118.

UK Gilt (10-Year)

Gilts have finally overrun range support at 116.50/00 that has stood as a floor for the UK debt market since November. This move confirms the tenacity and consistency of the bearish trend channel that has maintained the market’s pace since the March reversal. From a technical perspective, this past week’s bearish break was significant and could be considered the breaking of a neckline on an extended head-and-shoulders formation. However, the follow through on this technical shift (at least initially) has been relatively restrained. There is a notable 50% Fib of the last major bull wave around 115.00/25; but this lacking breakout has more to do with momentum. Should there be a successful test and rebuff of resistance founded in the former range support (which coincides with the top of the bearish trend channel over the past four months), it would suggest a steady downtrend.

German Bund (10-Year)

The Bund’s bullish break above 121.50 lasted for a little more than a week before the floor once again dropped out from underneath bulls. A look to the daily chart shows a clear and deliberately formed reversal; but the progression on the decline has been choppy. Now, a familiar level of support comes into view in the 120 pivot that acted as resistance between May 25th to June 19th – which also happens to be the mid-point of the June rally and 38.2% retracement of the larger July 2008 to March 2009 advance. A weekly view of this market shows a lack of regard to even clear levels like these; but should broader market activity remain constrained, this floor may hold up.

Japanese Government Bond (10-Year)

Rarely does the benchmark 10-year JGB bond futures contract respect a technical a distinct technical level. Oftentimes, a clear level of support or resistance is warped and bent before momentum takes off in the opposite direction. However, the low-hanging support at 139 (there was a more absolute high in the range from 139.30/50) proved itself to be a clear barrier to price action. The subsequent retracement from these highs is much more restrained that the June rally – suggesting it could be ultimately be a correction in a more progressive advance. Short-term support is seen around 138; but the next significant floor is not noted seen until 137.25 (a notable pivot and short-term 50% Fib retracement.

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

How Far Will Treasuries, Bunds and JGBs Retrace?

It has been a choppy reversal; but with last week’s close, the T-note’s bullish inclinations have been confirmed. The 12.7 percent drop in from December’s highs to June’s lows, however, has produced significant resistance that can sideline rallies going forward. The immediate concern for an ongoing advance is momentum. A look at the daily chart for the past three active trading sessions shows a clear development in congestion (though this consolidation pattern is still backed by a very steady rising trend and is developing into an ascending wedge pattern). There is a Fib confluence immediately overhead that could offset the fledgling bull trend for the first time since June 22nd or provide momentum with short-term breakout follow through. A 38.2% retracement of the 3/19 to 6/22 decline and 61.8% pullback of the 5/14 to 6/22 accelerated tumble hold at 119-02/04.

After consolidating around a support line drawn off of the June 2007 and October 2008 lows, the 10 year note has rallied, signaling what may be the next bout of deflationary pressures.  A rally above 121.025 would create overlap with the decline from the top and suggest that the decline was corrective.  A new high would then be favored.  Until then it is possible that the 10 year drop below 114.080 in order to complete an impulse (5 waves).

The benchmark 10-year Gilt has clearly stalled in its bear trend from March. In the process of developing congestion over the past month, the market has developed a notable triple bottom around 116.50 (a progression from a swing low back in early February). This floor is surprisingly clear, especially given the choppy nature of resistance. There is certainly a consistent trend of lower swing highs since the March peak; but there is no easy trendline to develop from this progression. Instead, we will have to watch for any rallies that overtake important highs. The next level to watch above is 119.65. However, the bias is clearly bearish within this broad triangle; so our primary concern is 116.50 support.

Gilt wave structure is clear.  There are 3 waves complete at the 2008 high.  An unorthodox top was made in 2009 in what is probably wave b of an expanded flat.  If indeed wave iv is a flat, then the correction is in its latter stages, if not already complete at 116.05.  Elliott channel support defends the low.  A rally is expected.

With last week’s close, bunds have overtaken resistance at 121.50 and extended momentum to a fifth consecutive weekly advance. This rally is as steady as the advance during the worst of the credit crisis back in October/November of last year; yet it is not as aggressive. On the one hand, the reserved pace can fend off expectations of an equally sharp reversal. However, until confirmed, this advance may merely be a correction in a true bear trend. In trying to take stock of the larger trend, we will need to gauge the follow through in the current move and/or measure the extent of the next bearish reversal. Though it provide little stopping power on the way up, immediate support is seen at 121.50 and resistance taken in two levels: 122.50 and 123.50.

The Bund has rallied through 121.55, creating overlap with the decline from the 2008 top and in turn suggesting that the decline is a correction and the larger degree trend remains up.  Support begins at 120.76.

No other trend can claim to be as steady as the 10-year JGB’s advance from early June. We are currently working on the first four week advance since March of 2008. However, we may not close the fourth week in the green. The consistency of this advance as seen on the daily chart has developed a very clear trendline. However, after overrunning 136.75 and 137.25; resistance will grow much more oppressive around 139.00/40. This bottom of this zone is the top of congestion from February to March and the latter figure is the high for one of the market’s most volatile periods in years. We will watch for a break of 139 or below 138.50 for signs as to the next leg of the trend.

Commentary has not changed in months…”a 11 year head and shoulders top may be in the works and 142 should remain intact (if the pattern is to play out) as the right shoulder of the formation.  A break below the neckline would likely see a breakdown that carries into long term support levels of 122.50 and 116.41/117.20.”  It is possible that 140.16 is exceeded in order to complete a corrective advance from the 2008 low.

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

Treasuries Put in For a Bullish Reversal; But Momentum Lacking

Treasury Note (10-Year)

Short-term Technical Outlook

Have we seen the end of bearish momentum for the benchmark T-note for a little while? After falling for six of the past eight weeks, the world’s safe haven finally found its footing in the vicinity of notable support. A notable 61.8 percent Fib retracement of the June 2007 to December 2008 rally helped to confirm a rising trend (there confirmed points are needed to verify a trendline); and finally curbed the multi-month long decline with a reversal at 114-16. We are still in a medium-term bear wave; so projecting upside potential is looking for a retracement rather than a reversal. The first zone of distinction comes in around 117-14/16 which is both the 50% retracement of the aforementioned wave and the 38.2 percent pullback of the May 11th to June 12th sell off. Upon review though, this is a relatively flimsy level.

UK Gilt (10-Year)

Short-term Technical Outlook

At one point, the 10-year Gilts’ drop last week seemed to usher in a break of 116.80. However, waiting for the weekly close, it was clear that investors’ convictions on direction were not set. The candle that comprised the entire week is a notable doji (a pattern that was present at the past three reversals in late December, early February and early March). Should this turn hold up, it would confirm the authority of the 50-week simple moving average and a double bottom formation with the February lows. However, the bearish trend from the March trend reversal still stands. A falling trend loosely defines the progression of lower highs since that top; but it is the pivot and 38.2% Fib at 118 that offers the solid level of resistance. We will look for either a break above 118 or below 116. The former could ultimately develop into a head-and-shoulders formation. The latter could simply spell out an aggressive trend change.

German Bund (10-Year)

Short-term Technical Outlook

The pace and direction of German government debt is not as clear as its US and UK counterparts. Following suit with the rest of the fixed income world, the 10-year bund was spurred on to an aggressive, bullish reversal last week. The 50 percent Fib pulled from the June 2008 to January 2009 rally provided a loose floor; which the market would have no qualms about temporarily breaking. However, after a tenuous test, the bulls would win out and produce a long lower wick. Looking ahead, the rebound for the Bund comes with few hard levels to work with. Immediate (but ultimately weak) resistance stands at 120, which doubles as the upper boundary to an ill-defined falling trend channel from March. The more technically-sound ceiling holds at 121.50. As a range bottom for nearly six months, this could prove a difficult boundary to run.

Japanese Government Bond (10-Year)

Short-term Technical Outlook

In an unusual turn for the Japanese Government Bond, we would see a clear and uninterrupted, three-day rally that tested the normal complacency of congestive price action. However, despite the 60-point advance, the market would not threaten to breech the boundaries of the 136.75 to 135.35 band that has developed over the past two-and-a-half months. We will have to watch for momentum across the government debt market; but unless there is a notable appreciation in treasuries the world over; the JGB’s advance is likely to fall victim to its range.

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

Slide In T-Note Accelerates, Other Treasuries Ease Up On Momentum

Treasury Note (10-Year)

Short-term Technical Outlook

The 10-year treasury has experienced extraordinary pressure over the past week. An initial observance of the mid-point of the June 2007 to December 2008 rally was unceremoniously erased in a third consecutive weekly plunge. Considering the character of last week’s candle, follow through looks to be a major threat; but momentum is far from certain. What is definite though is the relative weak influence support there is around 114-10/28. The rising trendline that began back in June is unsubstantiated and the 61.8% Fib of the same bull wave is otherwise unconfirmed.
 

Long-term Technical Outlook

The 10 year is holding above the 400 week SMA (save for a few days last week) and the series of lower lows and lower highs since early 2006 is intact so there is no reason to alter the bullish outlook.  Favor the upside and anticipate a record high.
 

UK Gilt (10-Year)

Short-term Technical Outlook

The 10-year Gilt has been one of the few government securities that has held back from developing its bearish intentions. However, this past week, an otherwise uneventful drop below 118.00 has led the benchmark one step closer to a more pervasive reversal. The aforementioned level has stood as a pivot for the whole year; the wide-range bar closed the week has clear this hurdle. What’s more, with this decline; we have confirmed and developed follow through on the break of the rising trendline going back to back to June 2008 lows. However, we still have not exercised the head-and-shoulders pattern that has been developing for this market for nearly 8 months now. We will monitor the 116.80 level as the neckline on this formation. 
 

Long-term Technical Outlook

Gilt wave structure is clear.  There are 3 waves complete at the 2008 high.  An unorthodox top was made in 2009 in what is probably wave b of a triangle.  If indeed a triangle is unfolding, then wave c completed last week and waves d and e should unfold over the next month + before a thrust higher completes the entire rally from the 2007 low. 
 
 
German Bund (10-Year)

Short-term Technical Outlook

Through the second half of last week, the Bund’s decline gained momentum. After taking out the 50-week SMA and pushing the boundary of a falling trend channel; the market is now taking a break at 118.00/25. This zone is held up by a 50% Fib retracement of the July to March bull wave and the general marker of the March 2008 swing high. Another sharp decline (like the kind we have been seeing regularly interspersed with congestion over the past three or four months could quickly take us to new lows. Vigilance is essential.
 
Long-term Technical Outlook

The Bund is similar to the gilt in that I anticipate a new high in a 5th wave within the 5 wave advance from the 2008 low.  Wave 4 may be complete at last week’s low. 
 

Japanese Government Bond (10-Year)

Short-term Technical Outlook

As it usually does with the Japanese Government Bond, congestion has grown messy. The tight congestion zone between 136.60/20 did not last long at all; but the ultimate break would not come equipped with anything resembling follow through. The jump back above the former support at 136.60 has invalidated this level as a meaningful technical definer; but larger figures are still in place. The long-term 50% fib is still in place at 61.8% below and there is plenty of chop above to slow rallies. 

Long-term Technical Outlook

Commentary has not changed in months…”a 10 year head and shoulders top may be in the works and 142 should remain intact (if the pattern is to play out) as the right shoulder of the formation.  A break below the neckline would likely see a breakdown that carries into long term support levels of 122.50 and 116.41/117.20.”  This is one of the best trade opportunities of the next year +.

 

 

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

Treasuries’ Bearish Reversals Losing Momentum

Treasury Note (10-Year)

Short-term Technical Outlook

After two weeks of aggressive declines, bearish momentum seems to have stalled for the benchmark 10-year T-bill. While this is likely more a factor of ebbing market forces (as we have seen the same drop in the US dollar and rally in equities cool), technicals were present to put in a floor on price action. The 50 percent Fib retracement of the June 2007 to December 2008 bull wave at 117-14 has helped to hold the market back; but it is not producing a steadfast stop. The 50-week moving average is further brining up support – and reminding us of the long-term bull trend behind this market.

Long-term Technical Outlook

The 10 year is holding above the 400 week SMA (save for a few days last week) and the series of lower lows and lower highs since early 2006 is intact so there is no reason to alter the bullish outlook.  Favor the upside and anticipate a record high.

UK Gilt (10-Year)

Short-term Technical Outlook

Unlike its US counterpart, the 10-year Gilt has deferred to congestion for more than a month now. The tempered pace of declines in government paper across the globe has helped to dampen week-to-week volatility and solidified frequented support. A floor has been fashioned out of 118 following the 38.2% Fib retracement on the May 2008 to March 2009 advance. However, stops should be set relatively wide, because price action is not reversing immediately upon tests of this level. Medium-term momentum is still bearish, but this is just a retracement in the long-term trend.

Long-term Technical Outlook

Gilt wave structure is clear.  There are 3 waves complete at the 2008 high.  An unorthodox top was made in 2009 in what is probably wave b of a triangle.  If indeed a triangle is unfolding, then wave c completed last week and waves d and e should unfold over the next month + before a thrust higher completes the entire rally from the 2007 low.

German Bund (10-Year)

Short-term Technical Outlook

The break below 121.75 has found follow through – though it has been choppy progression.  Over the past two weeks, however, we have seen high volatility and relatively narrow ranges. This has led to a couple of wide doji candles that have shown respect for support down around 118.50.  This is a level of support defined as a former resistance point through the most of 2008 and more recently as the bottom of a trend channel, a 50-week SMA, and 50% Fib pulled from the June/July 2008 run up all around 118.00/50. Once again, wide stops and aggressive entries are best for those looking for breakouts and reversals

Long-term Technical Outlook

The Bund is similar to the gilt in that I anticipate a new high in a 5th wave within the 5 wave advance from the 2008 low.  Wave 4 may be complete at last week’s low.

Japanese Government Bond (10-Year)

Short-term Technical Outlook

There are few markets that can boast congestion as consistent as what the 10-year JGB futures contract produces. This past week, the market finally took out another horizontal channel. However, unlike the break from the November-March zone, this recent breech is from a pattern only six weeks in the making; and the follow through has immediately dissipated. Support is now stepping in at 136.20, a long-term 50% Fib (a trend across the government bonds) that has little influence beyond this single level. Currently, the band holding back price action between 136.20-60 is too narrow to last. Expect a minor breakout relatively soon.

Long-term Technical Outlook

Commentary has not changed in months…”a 10 year head and shoulders top may be in the works and 142 should remain intact (if the pattern is to play out) as the right shoulder of the formation.  A break below the neckline would likely see a breakdown that carries into long term support levels of 122.50 and 116.41/117.20.”  This is one of the best trade opportunities of the next year +.

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

Treasury, Bund Bearish Reversal Lacks Momentum

Treasury Note (10-Year)

Short-term Technical Outlook

The break below 122-03 last month may have been pivotal for the ten-year Treasury note; but the price action we have seen since then wouldn’t suggest so. Monday’s decline pushed the contract below the abovementioned level once again; but there is still a range of support that has to be surpassed before the bear wave is back underway. An immediate hold up to declines is the 200-day SMA that matches the intraday pivot for the past three weeks around 120-16. This could turn into a significant trend deflector should momentum vanish. Otherwise, the next target is the swing low from the 8th at 119-22.

Long-term Technical Outlook

The 10 year is holding above the 400 week SMA (save for a few days last week) and the series of lower lows and lower highs since early 2006 is intact so there is no reason to alter the bullish outlook.  Favor the upside and anticipate a record high.

UK Gilt (10-Year)

Short-term Technical Outlook

The bearish reversal the gilt was able to win in March has struggled to develop its footing. This past week, the break below 120 was retraced just as quickly as it was won. Temporary resistance is seen around 121.35; and with the presence of the nearby floor, there is bound to be a breakout (regardless of direction) soon. There is a loose trend of lower lows still in place starting with last month’s swing high; so the technical bias is still bearish until 123.50 comes back into view.
Long-term Technical Outlook

Gilt wave structure is clear.  There are 3 waves complete at the 2008 high.  An unorthodox top was made in 2009 in what is probably wave b of a triangle.  If indeed a triangle is unfolding, then wave c completed last week and waves d and e should unfold over the next month + before a thrust higher completes the entire rally from the 2007 low.

German Bund (10-Year)

Short-term Technical Outlook

Just a few months ago, the bund was cutting a clear channel between 124.65 and 123. Since then, however, we have seen sharp burst of volatility that follow little technical pattern to an end. However, with the bullish reversal from 120.10, we can start to see the rhyme to this technical noise. This reversal occurred on around a major 38.2% Fib retracement pulled from the June to January rally. Another use for this reversal is to further confirm the presence of a descending trend channel that began in February/March. We will see pressure build between this hard support and traversing trend; but as of yet there is still plenty of room to maneuver.

Long-term Technical Outlook

The Bund is similar to the gilt in that I anticipate a new high in a 5th wave within the 5 wave advance from the 2008 low.  Wave 4 may be complete at last week’s low.

Japanese Government Bond (10-Year)

Short-term Technical Outlook

The benchmark JGB is back to cutting trends; but not of the sort that is attached to high volatility and fresh highs or lows. Instead, we seem to have returned to the same pace of congestion that the market was stuck to between November and March – though this time around the trading band is far more constrictive. Over the past three weeks, a series of lows has built up around 136.50 while a loose ceiling around 137.35/50 has capped attempts at retracing the March plunge. This is a tight range and will not likely last as long as the previous one.
Long-term Technical Outlook

Commentary has not changed in months…”a 10 year head and shoulders top may be in the works and 142 should remain intact (if the pattern is to play out) as the right shoulder of the formation.  A break below the neckline would likely see a breakdown that carries into long term support levels of 122.50 and 116.41/117.20.”  This is one of the best trade opportunities of the next year +.

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

Treasuries Finally Break Range; But Does This Confirm A New Trend?

Treasury Note (10-Year)

Short-term Technical Outlook

After three months, the benchmark ten-year T-note has finally broken out of its 124-17 to 122-03 confinement (without the temporary influence of a sharp increase in volatility like was the case back in mid-March). However, what would usually be considered a major technical event has generated little follow through follow through and momentum. In fact, the chop over the last week has completely lacked conviction on all levels. However, while this does add weight to the 100-day simple moving average (SMA) as a back up support; it would provide little influence should the bears start to push. Either way, the trend over the past three weeks for a steady bearish bias will prompt action with a second round breakdown or an aggressive reversal.

Long-term Technical Outlook

Only a break below the Elliott channel line would suggest that a top is in place.  That line is at 120.25 this week (week ending April 10th).  Until that line is broken, the risk of a bottom and continuation of the advance is high.

UK Gilt (10-Year)

Short-term Technical Outlook

The 10-year Gilt has bled off volatility over the past week and in do so has helped build up the relevance in support around 120. This week, the focus will be redoubled on the 38.2% Fib retracement of the Oct to Mar advance. After breaking trend last month, the four unique and prominent tests the market has produced on this level has developed an unambiguous level for the market to work with. From a mechanical standpoint, the past three months of price action for the Gilt has developed into a notable head-and-shoulders pattern with a neckline drawn up at this 120 level. Far more interesting is the same type of formation with a left shoulder at 124.75; but the trigger point for this setup is harder to call.

Long-term Technical Outlook

The rally from 116.52 is wave 5 from the advance that began in early summer 2007.  A likely resistance area is the 161.8% extension of wave i of 5, which is at 130.89.

German Bund (10-Year)

Short-term Technical Outlook

Volatility and chop have been indelible features of bund price action for the past month. And, even if the market is able to develop a notable drive, there is still plenty of technical congestion on both sides of the market to quickly curb trend development (just look at the quick reversal and drop from the 124.70 range high in early April). This certainly complicates things for a clean setup. Congestion is the most consistent scenario at this point (clear entries, stops and targets). Meanwhile, we will keep our expectations for follow through on a break of either 123.50 or 121.50 reserved to well under 100 basis points.

Long-term Technical Outlook

The Bund is lagging the Gilt but a break above the December high is expected.  A flat or triangle is unfolding from the late 2008 high.  Once that pattern resolves, an upside break is expected.

Japanese Government Bond (10-Year)

Short-term Technical Outlook

A bias may be developing behind the longer-term JGB chart; but the bullish drift isn’t prominent enough to develop a rewarding strategy. Instead, we should place this move within the context of long-term technical developments. Following the March/April sell off, this tepid rebound seems to be a weak retracement. A retest of the former 138.20 support would likely take weeks of chop at the market’s current pace. More than likely, volatility will step in well before this eventuality comes to pass and spur the market to a real technical test.

Long-term Technical Outlook

A 10 year head and shoulders top may be in the works and this year’s high at 142 should remain intact (if the pattern is to play out) as the right shoulder of the formation.  A break below the neckline would likely see a breakdown that carries into long term support levels of 122.50 and 116.41/117.20.

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