Treasury prices found support from the 124.0 round figure, with price bouncing up higher to 124.3 during US session. As there wasn’t any news released during the period, the strong push from 124.0 to 124.3 within such a short while can only be attributed to technical behaviors. This is especially true when we consider that risk appetite was bullish (as evident via US stocks) during that time, which should actually drive yields higher and hence prices lower. The fact that the bullish rebound got capped by the 124.3 mark lends credence to the assertion that it is technicals that is in charge right now.
Currently, price is rebounding off 124.3 once again after a push from 124.0 during early Asian session. It is important to note that even this morning’s speech by Obama failed to push prices lower, highlighting the strength of the 124.0 level despite strong bearish winds. Hence, even if we move lower from here, we could still see 124.0 holding especially if there isn’t any proper fundamental reasons fueling current drop.
Fundamentally, with war in Syria most likely not happening in the immediate future, there is even less reason for investors to seek safer assets. Therefore, should technical influence stop, we could easily see prices falling down heavily in line with the broad bearish sentiment. Even though a September tapering action could have been mostly priced in already, we could actually see such a scenario potentially be the catalyst to let technical bulls lose their grip and hence result in broad selling in the few months leading to the end of 2013.
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