Risk On or Off? – US10Y reaching resistance

Daily Chart


The US10Y benchmark rate fell heavily at the start of 2013 as Obama Administration avoided the Fiscal Cliff, bringing confidence back into markets. The Fed then follow suit, hinting at pulling the QE3 plug within this year, resulting in a 1-2 punch up that knock the benchmark rate out into the ringside.

From the daily chart, we can see price trying to pull itself back above the 132.40/50 arena. However, using the Stochastic (14) indicator, the divergence between Stochastic reading and price suggest that current recovery could be an anomaly/short-term reversal before heading lower once more.

Hourly Chart


Hourly chart paints a different picture, with numerous Bearish Reversal Patterns unable to find meaningful downside follow through. Furthermore, a Morning Star Bullish reversal appears to be forming just around 132.25 interim support, with price looking likely to test 132.40/50 resistance once more.

The question we need to ask is whether such a move is due to market genuinely shifting from a cheerful/optimistic euphoria post “Cliff” deal, to a fearful mentality. One does not need to look far for any reasons to be scared: Eurozone ongoing crisis, 2nd Cliff in March and US Debt Ceiling continue to weigh on every single fundamentals driven trader, and is large enough even for technical traders to take notice. Despite that, Stocks continue to perform well, similarly for commodities, lending credence that perhaps the joyful party hasn’t really truly ended. Should that be the case, current rally could be interpreted as a technical bounce, a “dead cat” bounce if you will, which is not surprising after such a phenomenal drop within such a short time.

From a technical perspective, 132.40/50 will be the ringside fence that differentiate whether traders are in their “fearful fighting” mood in the ring, or perhaps sitting on prime seats, relaxed and believing that all the bickering about EU, Cliff, and Debt Ceiling will end just like Pro Wrestling, where nobody gets seriously hurt at the end of the day.


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