Focus on US 10-year Treasury notes
The data on my chart for US 10-year Treasury notes goes back to 1953, with a low yield in 1954 at 2.29%. From here yields increased steadily to an initial peak in 1970 of 7.91%. A dip to 5.7% was seen in 1971 before rates raced higher to a peak of 15.82% in 1981.
The yearly chart below shows what happened from that peak in 1981 to the present day. It is a steady decline to a low in 2012 of 1.381%. After a bounce to 3.041% in 2014 we made a new low at 1.3210% in July last year.
The monthly chart below covers the period from 1999 to the present, with the peak in 2000 at 6.867%. In fact rates had been relatively steady throughout the 90s, declining from around 9% at the beginning of the decade to just above 5% at the end of 1993, then staying mostly within that range.
As you can see in the monthly chart, rates have continued the steady decline since the turn of the century. I have put various sets of Fibonacci retracement lines on the chart, with the most recent set starting from that peak in 2000 at 6.867%. This gives us our first 23.6% Fibonacci resistance at 2.6299%, a target we hit in December 2016 when we reached 2.6413%. The resistance worked almost perfectly as the market then reversed and sold off back to 2.305%.
The blue line represents the 100-month moving average, which is at 2.4710% and very close to short-term Fibonacci resistance at 2.513%. Therefore, in theory, holding below this area is negative in the short term.
T-note weekly chart
If we now zoom in again to the weekly chart you can see a downward-sloping red trendline. This joins the peaks from the high at the beginning of 2011 to the high at the end of 2013/early 2014. You can also see how we broke through this trendline at the end of 2016. This worked perfectly as support on the re-test this month.
The 200-week moving average has been trending mostly sideways for the last two years and is hovering around 2.24/2.23%. This isn’t far below that trendline which is holding the downside at the moment.
T-note daily chart
To complete the picture we look at the daily chart below. Adding Fibonacci lines from the low of 1.321% in July 2016 to the December peak at 2.641%, we have the first Fibonacci 23.6% support at 2.3295%. This held absolutely perfectly in the second and third weeks of January. Here it was also intersected by the 55-day moving average which has also been lending support this week.
It’s safe to say that bulls remain in control at this stage, as long as we hold above the Fibonacci support at 2.3295%. Only a break of the important weekly support at 2.24/2.23% would trigger further losses targeting the 2.14/2.06% area. But there is a very strong chance the market will bottom here and start to trend higher again.
We know the big obstacle for bulls in the weeks ahead is the 100-month moving average at 2.4710% and Fibonacci resistance at 2.6299%. Bear in mind also the 500-week moving average at 2.70%. If we see a clear break through here later in the year we are targeting the 2013 high at 3.00%. Beyond this we have the 2014 highs made in the first week of that year at 3.04%.
Technical Analyst & Trader
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