Technical Analyst, Saxo Bank
Summary: US 10-year Treasury Yields indicated reversal of uptrend last week after closing below 4.50, but the future didn’t agree and has now resumed downtrend. Yields could move to 4.80
US 10-year Treasury yields did close below 4.50 last week and below the lower rising trendline indicating a possible downtrend. However, the RSI didn’t close below 40 threshold i.e., not confirming a downtrend.
Wit the bounce back above the rising trendline and above the 55 DMA yields could be resuming uptrend.
Currently testing the 0.382 retracement a close above could lead to further upside to the 0.618 retracement at around 4.80.
The RSI is testing its falling trendline and a close above will indicate yields are likely to rise to 4.80 level.
A close above 4.80 would be an indication of previous peak at 4.01 is likely to be tested.
A close below last week’s low at 4.47 will establish a downtrend. A close below 4.47 will also most likely push the RSI below 40 thus confirming the bearish scenario
US 10-year Treasury future is from a technical point of view the most interesting and the instrument that is expressing the real interest the best, simply because it expresses actual trading. The Yield chart is merely “just” a calculation or derivative of the underlying instrument i.e., the future.
The future was rejected at the upper falling trendline and resistance at around 108 27/32, and the Cloud (shaded area)
Three times the future has failed to close above 108 16/32 and with the bearish candle 9th November the sellers have taken back control.
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Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.