Technical Update - US 10-year Treasury yields dropping below 3.5%. Where to next?  Technical Update - US 10-year Treasury yields dropping below 3.5%. Where to next?  Technical Update - US 10-year Treasury yields dropping below 3.5%. Where to next?

Technical Update - US 10-year Treasury yields dropping below 3.5%. Where to next?

Bonds 2 minutes to read
KCL
Kim Cramer Larsson

Technical Analyst, Saxo Bank

US 10-year Treasury yields dropped below key support at 3.5% extending downtrend but the T-Note future indicates weakening of the trend 

 

US 10-year Treasury Note future closed yesterday above 114 28/32 thereby cancelling the top and reversal pattern created last week and moving above 100 daily SMA.
The interesting development is that the RSI divergence that was not there when the Evening Doji pattern was formed is there now. There is now divergence on RSI indicating a weakening of the short-term uptrend. However, the uptrend could extend to the 0.618 retracement at 117.
If The US T-Note breaks below its rising trend line and closes below 113 20/32 the uptrend is likely to reverse.

Source: Saxo Group

US 10-year Treasury yields closed yesterday below key support at 3.50% i.e., extending the downtrend. A downtrend that could extend to the 0.618 retracement at 3.22. However, as mentioned above the T-Note future is showing divergence indicating a weakening of the trend which could cut the drop in yields short.

Source: Saxo Group
The technical picture for Euro Bund remains unchanged : https://www.home.saxo/content/articles/bonds/technical-analysis-us10year-yields-euro-bund-06122022


RSI divergence explained
When  price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
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