Bund/DAX – Increased Risk Has Investors Interested

• Risk assets holding up despite geopolitical concerns
• 10-year German Yield backs away from key low at +1.44% area
• Supply higher this week – concession building

 
June Bunds hit fresh contract highs last week as markets positioned themselves for a possible ease by the ECB at its next meeting on June 5th. Cash yields happened to print a year-to-date low yield (+1.439%).

The Techies Viewpoint: the markets decisive break of +1.50% certainly makes a compelling case for the bull to once again eye the +1.15% level.

Why? The total conventional auction supply this week is expected to be more than €23-billion, twice the amount of last weeks supply of €11.4-billion. The increased supply, along with a reduction in cash payments, and the technically elevated high prices could lead to further concession building this week. It seems that a percentage of the market’s risk/reward strategy is to favor selling strength based on the above three-reasons.

June 18 Technical Significance:

145.42 Continuation high March 3rd
145.07 Bollinger Band High
145.03 New Contract High
144.77 12:46 GMT Mon 12 May 2014
144.65 Alt Supply/Resist 23.6% fibo
144.46 38.2% fibo from 24th April/trend/high
144.29 50% of rally

Scope for a significant extension is expected to be limited with the Bollinger Band top at 145.07

DAX or DE30:

Global bourses are on the rise, again attracting cash out and away from fixed-income. The lack of fundamental data this Monday had investors focus their attention on China and Russia.

In overnight trading, China’s blueprint for a capital markets overhaul trumped any geopolitical concerns from Ukraine. Despite tension remaining relatively high in the region, investors have been confident in applying more risk.

The market remains focused on the potential for the ECB to open its toolbox of standard and non-standard measures – this allowed the DAX to take out a number of technical highs going back two-months to April 24th (9,618 and 9,645).

The Techie Viewpoint: Monday’s rally is providing bulls further ammo to again consider testing medium term targets 9,721/22 (Feb 26/April 24 peaks). Through here, certainly provides the markets further ammo to contemplate an assault on the all time high at 9,794.

Most bulls will be disappointed on a dip through 9,645, the previous high, but probably only turning truly “bearish” under 9,407/10 (double bottom and a key support level). This would open up the door to test April’s low (9,167).

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