Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Technical Update - UK Gilt and GBPUSD closing in on strong resistance forming potential reversal pattern
Kim Cramer Larsson
Technical Analyst, Saxo Bank Group
UK Gilt bounce seems to have hit resistance at the 0.618 retracement at around 108.59 forming a possible rising wedge pattern on daily time period.
If Gilt breaks below the lower rising trendline it could fuel a sell off down to support around 100. There is support at around 101.85.
RSI is still positive with no divergence indicating we could see another push higher possibly to the 0.786 retracement at 113.54. 200 daily SMA coming down will provide resistance.
Medium- to longer term view: RSI still negative with no divergence supporting further bearish outlook. If Gilt closes the week below 105.21 it will have formed a Bearish Engulfing top and reversal candle.
If that plays out RSI is likely to break back below 40 resulting in selling pressure to return pushing Gilt towards the 100 level possibly lower.
GBPUSD is forming what looks like a rising wedge on daily time period, not yet confirmed though as there is still upside potential to strong resistance at 1.23. However, the 200 daily SMA will provide resistance.
If GBPUSD closes below the lower rising trendline there is short-term downside risk to 1.1530-1.1360. RSI is still positive testing its rising trendline. A close below the trendline in combination with a close below the price trend line will indicate a correction is playing out.
Support at 1.1767 and strong support at 1.1144.
A move above 1.2153 will test the strong resistance at around 1.23
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