Technical Analyst, Saxo Bank
Summary: Both US and European Government yields dropped sharply the past week to test key levels. It is now correction time and yields are set to regain lost grounds. but how much?
US 2-year Treasury Note future spiked to the 1.382 projection of the January-February downtrend. If closing below 103 8/32 a correction down to around 102 13/32 could be seen.
US 10-year Treasury yields spiked below January/February trough and support at 3.32 only to bounce strongly. At the time of writing back above the 200 daily MA and could bounce further. If breaking above 3.60 there could be upside to the 0.618 retracement at around 3.78.
For 10-year yields to resume downtrend a close below 3.32 is needed. If that occurs a move to around 35 would be in the cards
Levels on the Treasury Note future: Spiked above January peak at 116 8/32 to collapse and now back below 200 daily MA. A correction down to the 0.618 retracement at 112 26/32 could be seen.
A close above 116 8/32 will extend uptrend possibly up to around 118 15/32
German Government Bond 10-year yield spiked just below support at around 1.97 to just a few points from the lower medium-term rising trendline. Yields has rebounded strongly and if moving above 2.97 a 0.618 retracement at around 2.45 could be seen. If yields closes back below 1.97 a new downtrend is likely to around 1.76 support
EuroBund future ran out of steam a few cents below resistance at around 140.68. If closing back below 136 bear trend is likely to resume.
For the Bund future to break bullish a close above 140.68 is needed. That could lead to a move to around 143.38 resistance
2024: The wasted year
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.
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.