Technical Analyst, Saxo Bank Group
Summary: US 10-year Treasury yields bouncing from key support a third time building foundation for higher yields. Resistance at 3.70 is key for +4% levels
German Government 10-year yields (EuroBund) in an uptrend eyeing 3% possibly higher
Futures are included in this analysis
US 10-year Treasury yields have formed a triple bottom pattern at the 3.25-3.28 level. Last week yields formed a Hammer/Morning Doji Star like pattern (It is not text book perfect, ideally the body of the bullish candle following the Doji should not cover the Doji body) that is an indication of a bottom and reversal.
Yields have since been on the rise and is closing in on the strong resistance area at 3.65-3.70; the 55 and the 100 Mas are coming down providing resistance and the Cloud bottom is at 3.70. A close above 3.70 is likely to fuel another rally in yields to around 4.00 - 4.10% as illustrated with the vertical arrows.
If 10-year yields slide back below 200 MA the support at around 3.28 could be tested once again.
Medium-term 10-year yields are in a downtrend but the weekly RSI is still showing positive sentiment. If yields move higher lifting the RSI back above its falling trend line the downtrend could have come to an end and be reversed. If weekly RSI close above 60 the trend is likely to be reversed. A yield close above 4.09 will further confirm that.
If the reversal scenario plays out higher yields above 4.33 is in the cards.
The US 10-year T-Note has formed a top and reversal pattern; Evening Doji Star like pattern with a Gravestone Doji. The T-Note future is testing support at around 114 7/32. A break below key support is at around 113 9/32. A close below that level is likely to fuel a sell off down to March lows and support at around 110 12/32
For this potential bearish picture to be demolished and reversed a close above 116 /8/32.
Medium-term the bearish trend is still intact despite a higher close in March. RSI having failed to close above 60 threshold on weekly chart thus still showing negative sentiment. A break below 113 26/32 is likely to accelerate the sell-off that could test the lower rising trendline. A break of the trendline could lead to a test of Q4 2022 lows at around 108 26/32.
An uptrend would be confirmed by a close above 117. With upside potential up to around 121.
German Gov’t Bond 10-year yields are in an uptrend after breaking above 2.40. Yields are currently testing the top of the Cloud and a close above could further fuel the uptrend.
An RSI close above 60 will add to the bullish picture.
There is no strong resistance until March peak at around 2.77.
To reverse this bullish picture a close below 2.12 is needed
Medium-term yields are bouncing from the lower rising trend line and support at around 1.96. Uptrend is intact and needs to close below 1.90 to reverse it.
RSI is showing divergence but if it closes above its falling trendline new highs in yields should be expected. If taking out February peak at 2.77 there is no strong resistance until around 3.40 which is also 1.764 projection of the correction.
EuroBund future is in a bearish trend. At the time of writing RSI is below 40 threshold and if it closes below the downtrend is confirmed with likely lower levels to follow. A move to test the March lows at around 130.77 could be seen. Support at around 133.17.
A close above 138.09 will demolish this bearish picture short-term
Medium-term the trend is still down. Despite showing RSI divergence which indicates a weakening of the trend lower levels could still be seen. If RSI closes below it falling trendline on weekly chart lower falling trendline could be reached.
To reverse the medium-term bearish trend a close above 140.30 is needed.
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