Treasury Yields May Bounce Higher After Touching Resistance
By Rom Badilla, CFA
September 25, 2012
After fears across the pond resurfaced the 10-Year U.S. Treasury rallied as the yield fell 5 basis points to 1.71%. With today’s move, the 10-Year U.S. Treasury is kissing against key resistance.
Credit Suisse technical analysts David Sneddon, Christopher Hine, Pamela McCloskey, and Cilline Bain set their focus on resistance at 1.70%. If the yield trades below, the 10-Year would see a more extended recovery to 1.65/635%. In Credit Suisse’s latest U.S. Fixed Income Daily, they provided the following color on the 10-Year:
10yr US yields have held support at 1.80% and are again testing chart resistance at 1.70. Extension through here would confirm a small top and see strength extend to 1.67% then the 61.8% retracement level at 1.635%. Removal of the latter is needed to target trend resistance from the July chart low at 1.62%.
Above 1.80% would look to 1.83%. A break here is needed to trigger a test of the 1.89/90% level. Extension through it would confirm a better base and target 2.00/01% – triangle and 61.8% retracement support – next.
Until the 10-Year falls below the aforementioned resistance level, the strategy for the research team is still short at 1.75% with a Stop-Loss below 1.70%. Their target continues to be 2.00%.
As for the Long Bond which has recovered by closing at 2.90%, resistance for the 30-Year U.S. Treasury lies at 2.89% and a trade below would lead to a push lower according to Credit Suisse.
The recovery has extended and through 2.89% would look to 2.83/795%. 30yr US has held support at 2.99/3.00% and rallied to test retracement resistance (50%) at 2.89%. We again look for selling here, but through it would allow a test of tougher resistance at chart and 61.8% retracement barriers at 2.83/795%. A break here is needed to ease ongoing bearish risk and see a test of 2.75%.
Above 2.99/3.00% looks to 3.03/3.035%. Through here is needed retest of 3.095/125% – trend and retracement support.
As with the 10-Year, the strategy is to look to short the 30-Year at 2.93% with a Stop-Loss below 2.89%. The bearish bias remains as their target for the benchmark bond is at 3.20%.
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