US10Y Technicals – Breaching 132.0 Ceiling

The 132.0 ceiling for US 10Y T-Note has finally be broken last week. The benchmark yield increased (bond price decrease) early Asian trade due to optimism from Japan spilling over to the rest of the world, however that move does not appear to be sustainable with bond price moving above 132.0 once more. This move is strange considering that US stocks actually rebounded late last week, with Dow Jones Industrial Average clearing the 14,000 hurdle. Certainly market does not appear to be severely risk adverse, but perhaps bond buyers are giving us early warnings that the rally in stocks could vaporize very soon.

Daily Chart


Using the Daily Chart, price is slightly bullish after breaking higher from the descending channel. Clearing 132.0 is a bonus, which will help in negating the Lower Highs, Lower Lows sequence that the Channel has been forming. The next level of resistance is 50 points higher at 132.50, which is slightly above the 38.2% Fib retracement from Dec 2012 highs (not shown on chart). Clearing 132.50 will put stress on bears and re-open case for bullish bias which opens up 134.50 for a full-retracement scenario.

Hourly Chart


Hourly Chart supports the scenario of higher Bond prices. Though price has broken below the rising trendline, current Kumo is acting as a thick layer of support against any further selling. What is more disconcerting is that the bearish Kumo twist that was formed appears to be short-lived, with the bounce off Kumo producing a bullish twist again. The Kijuu-Sen (Red line) provides further support along the Kumo perimeter. Stochastic is also suggesting that a interim trough is in place with a fresh Stoch/Signal cross.

Watch out for Ben Bernanke’s speech on Tuesday (10am EST) which will give traders more insight on Fed’s bond purchases. In could be a win-win situation for bond prices as an indication by Bernanke to continue bond purchases will help lift prices, while an indication to stop purchases may fuel risk-aversion that may result in liquidation of risk assets by investors to enter into defensive bonds. Also, continue to watch the 14,000 level of DJIA for any indication of fear creeping back into the market, which will push bond prices higher/yields lower.

More Links:
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