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From a technical perspective German Bunds have remained soft in their outlook. Since the rollover of the contract, the market has seen range bound trade. The market has remained below the 144.44 level, and it should remain under-pressure below here. The highs made on the Friday of the US jobs report, around the 144.00 handle should also remain firm resistance. The market had seen a move down to the 142.00 handle last week before recovering and this should be firm support now. The market remains well balanced going into the FOMC decision on Wednesday with the overall oversold conditions having been worked off and now back to favouring a neutral bias with both sides of the market open for a potential short-term move. Thus a move back through the 144.19-44 area may result in a sharp short-squeeze that could potentially signal that the market has bottomed for the moment. A move through the 142.00 handle support with a close below could then signal that the market has found its trigger point for a move towards the 1.7% yield area. The 1.7-1.8% area is a key medium term pivot and a move through here should force medium term participants into the market. Until then we may continue to see choppy trade without a clear break in direction.
Fed rate decision on tomorrow critical for bonds
Wednesday evening sees the FOMC announce policy measures. Given the Bernanke press testimony last month; this FOMC may be critical to determining how close the Fed is to start tapering asset purchases. Thus Bonds have moved back into an area which would favour either a move higher or lower. The softness of the USD of late has also seen it move back towards a neutral bias. The USD has retraced most of May’s rally. Although the FOMC decision is unlikely to be the decision day for any Fed tapering, the nuances from the statement and from the Bernanke press conference is likely to give some indication of how close the Fed is to start tapering its asset purchases. If the Fed start talking up the economy or as importantly inflation expectations going forward, we could start to see markets price in some tapering of asset purchases in the next 2 months. Otherwise a downbeat Fed may see the market put off tapering expectations until either year end or early next year.
On the 4H graph, I see a reversed head & Shoulder, with MA 23 and 44 in support of prices. FOMC minutes could very well be the trigger to break the oblique resistance (around 143.90/95 tomorrow). Target in such case is an hefty 146 but daily MA 50 at 145 or upper bollinger band at 144.72 are more reasonable targets.
Yesterday saw a continuation of the moves seen late on Wednesday. Equities, bonds and commodities declined and the USD was firmly higher again. Equities are now trading around crucial price areas. Further weakness from here could signal much deeper declines, and allow then to enter a longer term bearish trend. Much will depend on the next two days given the futures and options expires occurring and whether the declines seen can continue after they are out of the way with. The Bund is approaching a key medium term pivot level around the 1.73% yield level.
The Bund was firmly lower on the day. The market traded through the lows made on Wednesday evening and closed below here. The market struggled to take out the lows form last week and thus a firm close below yesterday’s low prints should allow or a smoother move to the 1.73% yield level which is a major medium term pivot. The outlook for the rest of the summer may be determined by trade around here. Otherwise a recovery through yesterday’s highs may signal that perhaps the market has double bottomed.
Markets were lower again across the board. Equities sold off to make new lows for the week after initially starting on a strong note, with the sell-off starting after the respective futures and options expiries. Bonds were also lower on the day with the US 10yr trading to 2.5% yields and the Bund hitting the 1.74% mark. This is now a very crucial yield level for Bunds and trade around here will determine the longer term market direction going forward. The USD was firmer on the day again, with most of the losses it had suffered since the start of the month now unwound. Commodities were also down on the day with persistent worries from China helping to exacerbate the overall negative sentiment.
The Bund was firmly lower on the day. The market saw a steady trend lower to the 1.734% yield level, hitting it around the cash close. The market is very interestingly poised. A close above this yield level may indicate a potential capitulation going forward. It is a key double top in the yield and a medium term pivot level. A recovery from here may assuage the markets very weak sentiment for the moment.
The Bund was firmly lower on the day. The market opened firmly below the 1.734% yield level and sold off subsequently going into the afternoon session. The market traded to below the 140.00 handle before seeing a decent rebound into the later evening session. The market should now remain firmly bearish above the 1.734% yield level and there should be some selling pressure on a move back to here. A close back through here may be the first sign that potentially the sell-off has run its course for the moment.
From a technical perspective German Bunds have continued to soften dramatically over the last week. The market has come under severe pressure since last Wednesday following the FOMC policy decision. Yesterday the market broke through and closed above the 1.734% yield level. This is around the futures price of 141.22-30. Given that this is the first break for many months, we could see some choppy trade around here, however the market may now be signalling its intent to trade back to the 2.00% yield level now. As long as this yield level now acts as firm resistance, and the market may be set to test it today, we should see Bunds stay under firm downside pressure. We would need to see a close back through the 1.734% yield level and post a close through the 142.02-09 area in order to start flushing out shorts form the market. This may be the first sign also that potentially the downward run has come to an end.
Fed rate decision sets tone for global market turbulence
Last Wednesday saw the Fed almost explicitly state that they are close to starting to taper their asset purchases. The upbeat commentary about the economy and the Fed bringing forward their expectations of reaching the 6.5% unemployment rate guidance has somewhat paved the way for a dramatic re-pricing of assets. US 10yr yields broke through the 2.5% yield level and Bunds through their 1.734% level. Equities have also seen a dramatic break down over the last week and the USD has firmed also. Some of the more dramatic moves have been in the short-end of the yield curve. Although the markets were prepared for Fed tapering of asset purchases since Bernanke’s testimony in May, they were less prepared for the eventuality of asset purchases ending by mid- next year with rates hikes to follow at the start of 2015. This sharp move in short-term interest rate products has also sharply increased the volatility in markets over the last week.
The Bund was flat on the day, trading to Monday’s highs before giving back its gains. The market should now remain firmly bearish above the 1.734% yield level and there should be some selling pressure on a move back to here. A close back through here may be the first sign that potentially the sell-off has run its course for the moment.
