Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Technical Analyst, Saxo Bank
US 10-year Treasury Note future closed yesterday above 114 28/32 thereby cancelling the top and reversal pattern created last week and moving above 100 daily SMA.
The interesting development is that the RSI divergence that was not there when the Evening Doji pattern was formed is there now. There is now divergence on RSI indicating a weakening of the short-term uptrend. However, the uptrend could extend to the 0.618 retracement at 117.
If The US T-Note breaks below its rising trend line and closes below 113 20/32 the uptrend is likely to reverse.
US 10-year Treasury yields closed yesterday below key support at 3.50% i.e., extending the downtrend. A downtrend that could extend to the 0.618 retracement at 3.22. However, as mentioned above the T-Note future is showing divergence indicating a weakening of the trend which could cut the drop in yields short.