US10Y – Risk Off? Bond prices don’t think so

On a day which saw Nikkei falling by 2.12% and Yen crosses falling across the board, one may easily be led to think that risk appetite is falling in Asia. This conventional wisdom generally hold true as Nikkei 225 is the most liquid and heavily traded stock index in Asia, and the early opening hours due to time-zone differences tend to influence other Asian markets later in the day. Similarly, Yen is the most traded Asian currency, and if Stocks and USD/JPY are moving in the same direction, correlations will tell us that a genuine “risk off” move is on the way.

However, this time round, the negativity surrounding Nikkei is not felt in other parts of Asia. Singapore STI is mostly supported at -0.02%, and traded mostly in the green today, while Korea’s KOSPI came in at +0.12% while India’s SENSEX closed at +0.05%, certainly not sharing the pessimism Japan is showing us. It seems that the issue surrounding Japan is unique to Japan alone, and not affecting the greater market.

Hourly Chart


The benchmark yield gapped lower on open after not trading on Good Friday holiday. Price did push up higher during the latter part of Asian trading session but we did not see any panic purchases of bonds despite the huge sell-off seen in Nikkei. Overall, technical indicators are pointing lower with Ichimoku showing a bearish twist, and price levels firmly below the Kumos. Stochastic readings also appear to be topping, despite readings still a fair distance from the Overbought region. Most importantly, price is now a significant footstep away from last Thursday’s consolidation zone, continuing the down cycle from recent high on 28th Mar.

It is important to note that treasuries has jumped in prices last week, and current bearish cycle is not enough to formulate a full bearish bias. Nonetheless, the underlying bearish sentiment can be felt as the lack of reaction from negative news (Japan Tankan and Chinese MFG PMI) is a strong sign that bears are still holding on, and frantic bulls are nowhere in sight.

Daily Chart


Daily Chart is mildly bullish with price forming higher highs since Jan, hence it is also all the more peculiar that bulls are not jumping on news opportunities to ride current bullish wave – echoing the same resilience in bears which the short-term chart is telling us. Stochastic indicator is also bearish, with readings peeking below the Overbought threshold line and suggesting that a bear trend may be under way. If this signal come through, we could potentially see price breaking the 132.7 support/resistance as price may head lower to test the bottom of the current mild uptrend.

As we have major Japanese news in the form of BOJ announcement coming this week, development today serve to suggest that other assets may be relatively immune to whatever outcome the BOJ may bring. To put it simply, should Nikkei collapse spectacularly come Thursday on negative BOJ announcement, do not assume that spillover may occur to other risk-correlated assets. Similarly, should USD/JPY fall post BOJ, we may not see USD strengthening on safe haven flows, but perhaps even weakening as large selling of USD may cause pairs like EUR/USD, GBP/USD or AUD/USD to rally. Expect the unexpected on Thursday.

More Links:
USD/JPY Technicals – Bearish breakout seen before BOJ decision
Nikkei 225 – Tankan Survey Tanking, Nikkei Lower
AUD/USD – Chinese Manufacturing PMI Grew Slower than Expected



This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu