At the beginning of last week we highlighted that the "US 10-year yield is now approaching another key technical level, 2.80/81%, which sees the 50-day sma as well as trendline support (drawn from 2013 yield low), and could prove initially supportive... that being said, should 2.80% give way, it could potentially signify a much larger correction underway and the outlook for US yields & the USD could turn far more ominous." Interestingly, this is precisely what occurred as the 10-year yield initially found support into the noted trendline support & 50-day sma for several days, however they finally capitulated this week on the back of a massive flight to safety. Technically, the bearish momentum which ensued saw the US 10-year yield also take out the key 2.76/77% level - Convergence of the 100-day sma & 50% retracement of the Oct-Jan. advance highlighted on Twitter, and as a result this could stage for a further continuation lower next week.
Watching the key 2.69/70% level:
◾ Daily Ichimoku Cloud bottom
◾ 61.8% retracement (Oct-Jan. advance)
◾ Psychological/option related
Additionally, it may also be prudent to keep an eye on daily RSI, as it is nearing its prior low around 35, which should ideally hold if the trend higher is US yield is to remain intact - If this falters, it could signify a potential sharper correction and as a result could open the door to an eventual test of the 200-day sma.
Key US data/events which may influence Treasuries next week:
◾ Monday - US Dec. New Home Sales, Jan. Dallas Fed Manufacturing
◾ Tuesday - US Dec. Durable Goods, US Jan. Consumer Confidence, Jan. Rich. Fed Manufacturing
◾ Wednesday - FOMC Interest rate announcement
◾ Thursday - US 4Q GDP & PCE, US Weekly Jobless claims, US Dec. Pending Home Sales
◾ Friday - US Dec. Personal Income & Spending, US Jan. Chicago PMI, US Jan. UoM Consumer Confidence
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