US10 Technicals – Smell of Fear Dissipating

After Dow managed to secure its position above 14,000, fear in the market started to fade away significantly. This is best expressed in Treasury Bonds as investor sold their bond holdings to enter into higher risk stocks in search for higher returns. The 10Y benchmark has fallen from the 133.0 high to reach below 131.50, breaking the 132.5 and 132.0 significant support along the way. Better than expected Non-Farm Payroll figures also helped propelled bond yields higher (bond price lower), though price was still some distance away from the previous swing low of 131.0.

Daily Chart

Stochastic readings on the daily suggest that an upswing may come into play soon, which agrees with 131.0 support holding scenario. However, price may be able to find resistance around 132.0 again before heading lower if risks appetite remain strong. Another scenario may see price falling immediately towards 131.0 and breaking the floor despite readings hitting Oversold region. This is unlikely as it requires a strong bullish catalyst, a shock that is larger than last Friday’s NFP print. Perhaps the catalyst could come eventually, but it will most likely not be this week as the news docket for the rest of the week appears light.

Hourly Chart

Short-term chart shows more bearish intent with current consolidation below the 131.50 level. Even if price manage to trade higher, only a break above 132.0 can signal a bullish revival. Stochastic reading is also entering into the Oversold region, suggesting that price may continue trading lower, breaking current consolidation zone towards 131.0.

Ultimately, yields is largely dependent on risk sentiment. Is the new Dow highs the mark of a fresh bull cycle? We can wait to see the reaction of S&P 500, who has its own historical high of 1,565 to contend with. A break of S&P 500 will certainly help enhance bullish momentum of yields and may be the catalyst needed to drive US10Y below the 131.0 floor.

More Links:
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