Article / 21 March 2018 at 14:09 GMT

Bond markets looking vulnerable again after pause

Technical Analyst / FuturesTechs
United Kingdom
  • Bond markets have taken a bit of a breather in recent weeks
  • Tonight's FOMC tonight and the BoE tomorrow may liven things up
  • What do the charts say going into these key events?

Fed
 The Federal Reserve is expected to announce an interest rate hike tonight. Pic: Shutterstock

By Clive Lambert

T-Notes gave a big sell signal back in January and subsequently sold off to 119.15 by mid-February. Since then the high has been 120.23 on two occasions, the latest failure coming last week to suggest the bulls were really struggling to convince. Sure enough we've set a weaker tone since and we broke a short-term uptrend line on the daily chart overnight. So we'll see if the Fed sets a tone that pushes the market back to/below 119.15 to target 118.175 next, then into the 116s (not all today though!).

Chart 1: T-Note futures – daily

T-Notes Daily
 
In the UK, Gilt futures have had a tough few days after posting several reversal candles either side of the weekend, and all appearing at former resistance. Below 120.53 we can look for a fresh assault on the February low at 119.13.

Chart 2: Gilt futures – daily
Gilt Futures Daily



Bund futures have also posted a few reversal candles of late to warn that we might be about to turn over, especially as these have appeared on the retest of the 200-day simple moving average. If/when 157.67 breaks look for a test of channel support, which is at 157.10 today, moving higher by around 10 ticks a day. Below here we can look for 156.22 then back to the February low at 154.60.

Chart 3: Bund futures – daily
Bund Daily
 
So the charts are suggesting "returning weakness" is the theme. Let's see how markets respond to the central bankers over the coming days...

– Edited by Clare MacCarthy

 

Clive Lambert is chief technical analyst at FuturesTechs 

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