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Technical Update - US 10-Year Treasury Yields and Euro Bund are ripe for a correction. But how big?

Technical Update - US 10-Year Treasury Yields and Euro Bund are ripe for a correction. But how big?

Bonds 4 minutes to read
KCL
Kim Cramer Larsson

Technical Analyst, Saxo Bank

US 10-Year Treasury Yields look ripe for a correction. Divergence on RSI indicating the uptrend is stretched. If yields close below the steep rising lower trendline a correction down to 3.64-3.56 could be seen. Support at 3.85.

Source: All Charts and data Saxo Group

The US 10-Year Treasury Note future is testing its short-term falling trend line. Down trend is stretched, and the future could see a correction up to key strong resistance at around 114. Some resistance at 11 28/32. 
If the future drops back and takes out lows at 108 26/32 and RSI closes below its lower rising trendline further down trend is confirmed.

The T-Note Future has dipped below support at 111, down to levels not seen since 2007 in what looks like 5th exhaustive vawe lower reaching 0.618 Extension of vawe 3 and 1.618 projection of the 4th corrective vawe. It would be classic exhaustion levels for a 5th vawe.
RSI is at levels not seen in decades but there is no divergence. However, if RSI breaks above its falling trend line a larger correction could be seen.

Euro Bund future has formed a Doji Evening Star bottom and reversal pattern on the daily time period. RSI divergence supports the correction scenario which can take the und future to resistance at around 142.62.
If RSI fails to break above the 60 threshold bear trend could resume.  

Longer-term Euro Bund dipped below 0.618 Extension of vawe 3 and just a few cents from touching 1.382 projection of Vawe 4. Bund Future is now back above the key support level at around 136.42 and seems ready for a correction indicated by the RSI is showing divergence. Unless RSI closes October below horizontal dashed line. If RSI closes October below dashed line – value 25.58 – there is no divergence and lower levels towards 129-126 could be seen.  

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