Technical Update - Correction time in Interest rates
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Summary: Interest rate futures have reached strong key supports and seems to be bouncing from here potentially forming bottom and reversal patterns
US 10 years Treasury Note future touched the key support at 117 13/32 and is not bouncing strongly. If the future closes the week above 118 24/32 it will be forming a Bullish Engulfing bottom and reversal candle. With divergence on RSI it points to a strong rebound likely up to the 0.382 retracement of sell off following latest rebound. However, if the rebound get some traction a bounce to around 124-124 19/32 is not unlikely.
The two possible scenario are indicated by arrows on the chart. A minor rebound (blue arrows) and larger one (orange arrows)
Euro Bunds is bouncing off of support area 151.44-149.60. A bounce that could take Bunds back to 157.21-158.58 before selling pressure could resume. If Bunds closes the week above 150.94 is has formed a Bullish Engulfing candle which is a bottom and reversal signal.
No divergence on RSI indicates we could see lower levels after a likely rebound correction.
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