Technical Technical Technical

Technical Update - Rising yields ripe for a correction

Bonds 3 minutes to read
KCL
Kim Cramer Larsson

Technical Analyst, Saxo Bank

Summary:  Yields have been rising rapidly the past 6 months nearing strong resistance levels. A correction should be expected before the rise continue


US 10 year Treasury yields are testing 3%, closing in on the 3.25% resistance. 3% level is the Inverted Shoulder-Head-Shoulder target outlined in previous analysis.

Source: Bloomberg

The US 10 year Treasury Future has reached its Shoulder-Head-Shoulder target extending it close to strong key support at around 117½. A correction should be expected from here.
With the past 4-5 weeks of selling pressure a correction is likely possibly up to test the longer term rising trend line i.e. up to around 121½. However, trend is down and key support is not unlikely to be taken out. A possible picture is illustrated by arrows on the monthly Futures chart.

RSI is in extreme territory currently at 22 indicating massive oversold but with no divergence. A correction on the Future is likely to lead RSI to test its falling trend line.

Source: Saxo Group

The US Treasury Bond future has broken the long term rising trend line hovering around 200 monthly SMA. Further down side to test the support at 136½ is likely.

Source: Saxo Group

Euro Bund has broken several key levels in massive sell-offs and is close to strong support area around 151.50-148.00. Correction around that area should be expected before sell-off is likely to resume.
RSI is below 40 threshold for the first time in decades underlining the negative sentiment.

Source: Saxo Group
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