Learn to Trade Bond Futures 20th July
Overview
Over the last five days the Bund has predominately traded sideways unable to produce any meaningful break. The US Ten Year has been far more bullish, encouraged by poor US macro data it has broken to the upside breaking key daily resistance.
Thoughts from the trading floor
From a technical perspective we have seen very little change in the Bund from last week as it has predominately traded sideways in recent times. To the upside resistance lies at 129.86 and then all times highs at 130.37 whilst to the downside support lies between 128.18 and 127.90 and below that at 127.12. The US Ten Year rallied aggressively last week taking out key resistance at 123.010. This level may prove pivotal over the next few trading sessions as a consolidation above here could result in resistance at 123.275 and 124.180 being tested.
This Friday we will see the results of the European bank stress tests, an event that will hold traders attention and potentially may result in a strong reaction. Yesterday we saw the first possible result with sources stating that German bank Hypo Real Estate had failed. This was not that significant as this bank is to all intensive purposes state owned, however expect to see many market moving source stories relating to more important banks before the week is out. Overall traders will use these stress tests as an indicator of the health of the European banking sector and any significant failures would be a massive shock and market moving.
This week may prove particularity busy for Bond traders with many different economic announcements. Besides several key earnings including Goldman Sachs and US housing data we will see Bernanke's latest monetary policy report testimony to the Senate. We expect him to try and strike a balance between talking up the US recovery while reiterating that stimulus is still required. Finally it worth noting that a large 30 year German government auction will take place on Thursday providing an insight into current demand for longer dated German debt.
Important events this week.
- Tuesday: Housing Starts US, Goldman Sachs Q2
- Wednesday: BOE Minutes, Morgan Stanley, Wells Fargo Q2
- Thursday: 30 Yr German Bond Auction, Existing Home Sales US
- Friday: IFO Germany, GDP UK, European Bank Stress-test results
Bull View
Bulls will be keen to see the US Ten Year hold above 123.010 in doing so creating the opportunity for a further leg higher. A continuation in the softening of US macro data and a dovish testimony from Bernanke would greatly aid their cause this week.
Bear View
Bears will continue to feel under pressure and will be looking to the European bank stress test results to bring some good news and reassure the market that Europe is still fundamentally strong.
Futex View
We remain bullish both the Bund and US Ten year, however with so many releases this week we expect trading conditions to be choppy. For now we will continue to look to buy dips as we expect a double dip scenario to play out.
Tags: bond, futures, learn to trade, market profile, technical analysis
