Technical Analyst, Saxo Bank
Summary: US 10-year Treasury future uptrend seems to be reversing sending yields above 4%. If 4.10 is taken out there is room to 4.25
EuroBund future has reversed it uptrend testing key support area
US 10-year Treasury yields are bouncing somewhat from just above strong support at around 3.72
Breaking bullish out of its falling channel pattern yields are currently testing the 200 DMA and resistance at around 4.05.
A daily close above 4.05 could lead to further upside. Minor resistance at 4.10 which is also the 0.618 retracement of the last leg down, and strong resistance at 4.29 just above the 0.382 retracement of the entire downtrend since October at 4.25.
The 55 DMA has crossed over the 100 DMA when they are both declining forming a Death Cross. However, most of the down trend has probably occurred when the Death Cross is being formed.
The two Moving Averages do however, act as fairly strong overhead resistance limiting the uptrend at least on short-term
If rejected at 4.05 and in stead is sliding back below 3.78 downtrend is resuming
The US 10-year Treasury future was rejected at key strong resistance at around 113 8/32 now broken below its lower rising trend closing in on key support at 111 12/32
A close below 111 12/32 could lead to a sell-off down to around 109 10/32 level.
However, RSI is still in positive sentiment with no divergence indicating what we are witnessing could just be a correction. To resume uptrend a close above 113 12/32 is needed
EuroBund future has reversed its bullish trend currently testing upper part of support area at 135.45-134.55. A break below 135.45 and the lower part of the support area at 124.55 is likely to be tested.
If that scenario plays out there could be further downside in store for the Bund future.
If closing below 134.55 further selling pressure down toa round 133.15-132.75 could be seen
For the Bund future to resume uptrend at close above 137.84 is needed 2024: The wasted year
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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.