Article / 29 June 2017 at 13:29 GMT

Bunds, Gilts lead bond markets lower

Technical Analyst / FuturesTechs
United Kingdom
  • Hawkish central bankers spur bunds decline
  • Gilt futures moving lower as well
  • MACD and RSI point T-notes lower

Bonds
Bond charts point lower as central bankers wax hawkish. Photo: Shutterstock

By Clive Lambert

The chart below is the German 10-year bund future, the benchmark for European bonds, and as you can see we've endured some hefty losses in recent days on various (dare I say coordinated?) hawkish comments from the world's central bankers.

Bund future (daily):
Bund Daily

Create your own charts with SaxoTraderGO click here to learn more

Source: CQG

We have given back an entire month's worth of gains in a few days, selling off back to levels last seen in May, and are now coming up to some important levels on the "bigger picture" chart.

The low/bounce back in May was 162.01. The low today as I write is 162.25. Below 162.01, the next levels of support are 160.74, 160.08, and 158.68. The latter was the low/bounce last December and a break below here would put a major top on the chart and potentially call an end to the rally that seems to have been going on for my entire career!

Bund (weekly):
Bund Weekly
Source: CQG
 
We have seen a similar move in the Gilt future, the bunds’ UK cousin:

Gilt futures (daily)
Gilt Futures Daily
Source: CQG
 
In fact it’s been very neat as we’ve gapped lower for two days in a row and the gaps have done their job. We are now back at Fibonacci support at 125.84 and the last higher low from May at 125.61. 

Breaking this area says we can keep going lower targeting 124.80, 124.40, 123.76, then 121.60.

In the US, Treasury notes topped out last July,and sold off through the rest of the year to a low of 121.195 in mid-December. We then saw a solid, albeit sometimes halting recovery, getting up to 127.08 a few weeks back. 

We broke a short-term uptrend line at the start of this week and have since broken another support level of note at 126.05 and look good to test 125.03, below which we can target further weakness to 124.14, then 123.245, then back to that December low. 

MACD and RSI agree that lower is the path we’re treading now with evidence of bearish divergence on both, similar to that seem this time last year just before the big drop.

T-Notes (daily):
T-Notes Daily
Source: CQG

— Edited by Michael McKenna

Clive Lambert is chief technical analyst at FuturesTechs 

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail