| Index | Strat | Risk | Target |
| T-Note | Flat | ||
| Gilt | Flat | ||
| Bund | Flat |
Treasury Note (10-Year)
Short-term Technical Outlook
The benchmark, ten-year note has not taken to a clear direction yet; but the world’s safe-haven has overtaken a gradual trend line that has been in place since February. This past week, a choppy decline from the bearish reversal from the opening days of April pushed the market below 122 and subsequently brought an end to the said rising trendline. However, in reality, this technical formation had relatively little influence on price action – and this was seen in the lack of a market reaction to such a shift. True support rests in 122-00/03 where a long-term 50% Fib has held the market to a clean February reversal. Without a confirmed break below this support; we will look for another, slow range swing.
Long-term Technical Outlook
Only a break below the Elliott channel line would suggest that a top is in place. That line is at 120.25 this week (week ending April 10th). Until that line is broken, the risk of a bottom and continuation of the advance is high.
UK Gilt (10-Year)
Short-term Technical Outlook
The benchmark Gilt has come one step closer to a major trend reversal. Since curbing its bearish momentum on the early March reversal, we have seen a wide band of chop that was more or less bowing to the general, rising trend from last summer. However, with last week’s sharp increase in price action and a notable bearish close, we have seen this steady trend has been broken. Already taken stock of the next technical setup, we can see this pair is in the process of developing a clean head-and-shoulders formation. The shoulders are not even; but the neckline derived from the 38.2% Fib of the Oct-to-Mar Fib at 120 is clear enough to project breakout potential. This will be the critical level to watch this week.
Long-term Technical Outlook
The rally from 116.52 is wave 5 from the advance that began in early summer 2007. A likely resistance area is the 161.8% extension of wave i of 5, which is at 130.89.
German Bund (10-Year)
Short-term Technical Outlook
Volatility has been excessive for the 10-year bund over the past month. Last week, the markets were so active that moderate technical levels were overrun without a clear sense of follow through. Some semblance of resistance can be claimed around 123.00/50 as the market hasn’t officially closed about this level; but a follow through probably wouldn’t last long enough to make a confirmed trade worth the trouble. Alternatively, lows around the 121.60 swing low make for a better base as tails have been relatively constrained. Unless we are trading on a very short time frame, this market is essentially directionless until some progress is made on either side of the market.
Long-term Technical Outlook
The Bund is lagging the Gilt but a break above the December high is expected. A flat or triangle is unfolding from the late 2008 high. Once that pattern resolves, an upside break is expected.
Japanese Government Bond (10-Year)
Short-term Technical Outlook
The initial bear wave has clearly run its course. This past week, the 10-year Japanese Government Bond (JGB) attempted to forge a bullish retracement; but the rally would run of steam rather quickly. Now we are returning to one of the JGB’s more familiar technical patterns: congestion. Referring to historical congestion, 135.50 is a notable, albeit questionable, level of support. However, a genuine break below 136.50 would likely overrun 136.20 as well – though the 61.8% Fib at 135.25 is a different matter.
Long-term Technical Outlook
A 10 year head and shoulders top may be in the works and this year’s high at 142 should remain intact (if the pattern is to play out) as the right shoulder of the formation. A break below the neckline would likely see a breakdown that carries into long term support levels of 122.50 and 116.41/117.20.
Written by: John Kicklighter and Jamie Saettele, Strategists for CFDTrading.com
Questions? Comments? You can send them to jkicklighter@cfdtrading.com
