US10Y Technicals – Bearish Breakout Seen

Treasuries Yields continue the behavior of ignoring Syrian crisis, with prices continuing to push lower despite Obama securing the go-ahead from Senate Foreign Relations Committee, bringing him 1 step closer to launching the first missile into Syria. Usually such developments would invoke higher Treasury prices as wars tend to be bad for businesses. However, in this case it seems that Fed Tapering remains a bigger bogeyman for traders, as Treasury demand did not rise, but instead decrease yesterday.

This decline in demand came hand in hand with Stock market pushing up higher which as the result of stronger Automobile sales. This behavior isn’t unnatural per se, as higher stock prices stoke risk appetite, and hence decreasing the demand for safe but low yielding assets such as Treasuries. However, we cannot deny that fear of QE tapering is a contributor for lower Treasury prices. A recovering Automobile industry signal good times ahead in terms of consumer sentiments and the manufacturing activities, not to mention the jobs that will be created as the industry continue to recover. Stronger economy in this case is interpreted by bond traders as further confirmation and fuel for Fed to carry out a tapering action, sending 10Y prices lower.

Hourly Chart


It is also interesting to see 10Y prices finding support from the previous day’s swing low. This support level continued well into the Asian session, until a sudden break happened out of nowhere when newswires appeared to be quiet. Considering that Asian stocks are broadly higher (barring Nikkei 225), it is not surprising to see stronger risk appetite driving demand for Treasuries lower. What is more interesting is that the support line continued hold out for most part of the Asian trade until it finally broke. As the support level was holding out against broad fundamentals, a break will likely result in significant bearish follow through, even though Stochastic readings tell us that we are currently extremely oversold.

Weekly Chart


A bearish breakout/extension move can also be seen with 122.0 as the next bearish objective. Last week’s Gravestone Doji was the 1st sign of strong bearish pressure, and should we close around current levels this week, we may be able to see bearish acceleration towards 122.0 as the bearish Evening Star pattern would be confirmed.

More Links:
Gold Technicals – 1,385 Support Threatened
GBP/USD – Pressure Prevails as it Surges through 1.56
AUD/USD – Moves Strongly to Two Week High just shy of 0.92

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