Learn To Trade Bond Futures 3rd August
Overview
Over the last five days the Bund has preformed well recovering a lot of the ground lost the previous week and creating a stronger technical position. The US Ten Year also performed strongly forming new 2010 highs last Friday. This week traders will be focussed on the latest rate decisions from the ECB and BOE as well as the jobs report on Friday.
Thoughts from the trading floor
From a technical perspective the Bund recovered well last week reasserting that it is currently trading in a sideways range. To the upside daily resistance lies at 128.66, a level last tested on Friday, and above that there is a pivotal level at 129.55. If we were to see both of these prices taken out a re-test / break of the high would be likely (130.37) To the downside key support remains at 127.12 and below that at 126.26. The US Ten Year has outperformed the Bund in recent times and last week it achieved a new yearly high at 123.285. This coincides with a daily resistance level, if a strong break of here can be achieved bulls will look to push on to 124.270.
This week a lot of focus will be placed on the ECB and BOE. At this stage no-one expects the BOE to shock the markets, although assuming inflation remains contained further QE appears likely down the road. We are likely to see more from the ECB, as many traders look for an extension of the LTRO programme through year end. If we do not see the ECB move in this way the market will likely react negatively with a sharp rise in 3 month euribor rates. A move that would provide the Bund with support.
In recent statements Fed Chairman Bernanke has stated his dis-satisfaction and concerns relating to the sustainability of the US economic recovery. These fears seem to be so great that many believe that they will move to extend the bond buying programme. Potentially this shift in policy could occur as soon as the next FOMC rate decision on 10th August. This would of course be very bullish in the short term for the US Ten Year and by proxy the Bund. It is also worth considering that we may see bond traders place extra significance on this weeks payrolls number as unexpected weakness here may add further credence to a fast return to QE.
Important events this week.
- Wednesday: ADP Employment Change, ISM Non-Manufacturing US
- Thursday: BOE, ECB Rate Decision
- Friday: Change in Payrolls US
Bull View
Bulls will be keen to continue the upward momentum in the the US Ten Year and reassert themselves in the Bund. A poor payrolls figure this week would raise the likelihood of more QE in the US and would provide bulls with a large boost.
Bear View
Bears will be keen to gain some control as any selling at the moment appears to be met with a strong bounce. In the short term consolidation at the the current levels may be the best they can hope for.
Futex View
We remain bullish the Bund and the US Ten Year and expect that the jobs report on Friday will support this view. Therefore we think that pull-backs continue to provide good buying opportunities.
Tags: bond, futex, futures, learn to trade, market profile
