Market Economics | Interest Rate Strategy - BNP PARIBAS ...

Technical Analysis – Interest Rates & Commodities
Bond & Short-Term Contracts
• Europe: Still a bottoming/up tone around key 2.559 (LT falling wedge sup) sustained by doji bottom reversal
• US: Wide bottom H&S scenario remains possible from 2.90 area but needs to break above ST falling wedge
• Short-term contracts u0: MT toppish tone on Euribor (Top H&S?) while ED is still above its ST 61.8%
Equities & Commodities
• WTI (Cl1): Stalling below 78.12/40 (LT rising channel support/ST 61.8%) & 79.38 top, keys to resume MT rise
• Equity markets: Markets remain consolidative MT but with a ST up bias still developing improving MT picture
US 10y: Down within ST falling wedge but bottoming on 2.90 support area MT Trend: Consolidative Range: 2.95/3.15
Last correction since 4.01 April top sent it 2.458 3.311
below 3.104 (Oct ’09 low) & 3.022 (LT 50%),
opening the way for further weakness within
the current ST falling wedge (2.774/3.049)
towards the key 2.789 (LT 61.8%) level.
However, if a ST rise now develops from the
current 2.879 low, this could be analysed as
the potential 2 nd shoulder’s low of a wide LT
bottom Head & Shoulders with a potential
neckline at 3.97.
First negative step would be a break above
3.049 (ST falling wedge res), with
resistances then at 3.213 (61.8%), 3.311,
3.444 & 3.578 (ST 38.2, 50 & 61.8%).
Tech Snapshot
- Within a ST falling wedge
- Perhaps building LT Head & Shoulders
Strategy: Aggressive could retry small
short on 2.90 to play H&S. S/L 2.84.
Aggressive will sell ST wedge resistance
break
UK/EUR 10y bond: Bias weak below 83.5/86.4 area for 63/66 MT Trend: Toppish/weak Range: 68.0/80.0
Break above 81.4 (weekly LT triangle res) in 45.7 103.2
February opened the way up for 115.8 (2005
top) but it stalled on critical 103.2 (LT
61.8%) and LT rising channel resistance
(now 114.8) & bearish divergences printed
on weekly RSI then favoured weakness.
The risk still seems to extend current
consolidation given 83.5/86.4 (2-dip neckline
& ST rising channel support) break within a
possible falling wave “4” for a move towards
73.9 (weekly LT rising channel support) and
perhaps then 59.3/63.0 (MT 38.2% & & 2-
dip theoretical target). However, watch slight
rising divergences appearing which could
favour a ST rebound now.
Tech Snapshot
- Stalled on LT 61.8%
- Back below LT triangle resistance
- LT weekly rising channel support tested
- Top 2-dip neckline at 83.5 broken
STRATEGY: Bearish sold 83.5/85.3 with ½
covered 70 & ½ for 66 & S/L 77 now
Christian Sené 16 July 2010
Market Mover, Non-Objective Research Section
47
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