Article / 04 September 2014 at 15:06 GMT

Why it could be looking bright for Euro bond futures

Technical Analyst / Saxo Bank
  • ECB lowers interest rate again
  • Euro bond futures can rise further
  • Short-term minor corrections can be seen 

By Kim Cramer Larsson

The European Central Bank lowered the interest rate earlier today  —  again. But how does it look from a technical point of view? Let's have a quick look at the short- and longer-term picture on Euro Schatz and Bund.


In Q2, Schatz broke out of the bearish trend channel it had been trading in 2013, forming a symmetrical, triangle-like pattern this year. It is close to reaching its highest peak in that triangle, which would be the minimum price target, at around 111.

Back in 2012, it was actually a double-top pattern. If we see a close above 111, the bullish move could be extended to around 111.35. RSI is pushing towards overbought but no divergence can  be seen.

Schatz week
Source: Saxo Bank

Short-term, Schatz has been quite choppy as there is divergence on RSI. Look out for the rising trend line (orange line).

Schatz daily
Source: Saxo Bank


Euro Bund: Although RSI is in overbought territory there is no divergence on either the daily or the weekly chart, which indicates that Euro Bund can move higher. 

Bunds weekly Source: Saxo Bank

Short-term, it is a sign of weakness that Bund is dropping back after it was lifted earlier on the back of the ECB announcement. However, as mentioned previously, there is no divergence on RSI and no divergence on MACD. Currently, RSI is testing the 60 threshold. Look out for a close below, which can signal a correction down to around 150 ie  testing of the rising trend line. 

Source: Saxo Bank

-- Edited by Kevin McIndoe

Kim Cramer Larsson is a technical analyst at Saxo Bank.

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