Forex – US 10yr note futures are trading near levels not seen since March 2004

US 10yr note futures are trading near levels not seen since March 2004, but are having some difficulty building on the break above the Nov high at 114/31.  Note too that the market is within the final upleg in the rally from the June low at 108/06 (wave 5, see numbering on daily chart below), while technicals are not confirming this recent push higher.  Though this suggests that at least month of correcting lower and 4-5 point retracement is overdue, there are still no signs of a top “pattern-wise”, and therefore too early/risky to short.  For now, would stay patient for a better risk/reward entry (expected to be on the short side ahead).  Note in the early Dec email, affirmed the long position (bought in mid Nov at 111/31) but took profits on the Dec 10th close below the bullish trendline from Oct (then at 112/19, closed at 112/12 for a 13 tick profit) and before the resumption of the rally. 

US 10yr note futures are trading near levels not seen since March 2004, but are having some difficulty building on the break above the Nov high at 114/31.  Note too that the market is within the final upleg in the rally from the June low at 108/06 (wave 5, see numbering on daily chart below), while technicals are not confirming this recent push higher.  Though this suggests that at least month of correcting lower and 4-5 point retracement is overdue, there are still no signs of a top “pattern-wise”, and therefore too early/risky to short.  For now, would stay patient for a better risk/reward entry (expected to be on the short side ahead).  Note in the early Dec email, affirmed the long position (bought in mid Nov at 111/31) but took profits on the Dec 10th close below the bullish trendline from Oct (then at 112/19, closed at 112/12 for a 13 tick profit) and before the resumption of the rally. 

Long term, the long held bullish view of an upside resolution of the large falling wedge since the June 2003 high at 120/14, targeting eventual gains back to the 120/14, remains in place.  Note that the upside resolution was confirmed on the Aug break above the ceiling (then near 108/00, see weekly chart/2nd chart below).  However, risk is rising for at least a month of consolidating (see shorter term above) but would be seen as a correction, with a resumption of the gains to new highs after (see “ideal” scenario in red on weekly chart/2nd chart below). 

David Solin
Partner, Foreign Exchange Analytics

 

[NP][/NP]

Foreign Exchange Analytics has it's roots in both the emerging information technologies and the global economy that characterized the last two decades.  As currency transaction volumes soared in the wake of the 1985 Plaza accord, the need for timely concise information on what forces were driving and would drive exchange rates became critical.   David Gilmore was one of a new breed of analyst that saw a void of relevant, market moving... More