Benchmark Treasury yield: Can the climb clear the Cloud?
U.S. equity index futures decline: Nasdaq 100 off ~0.7%
Euro STOXX 600 index down ~0.6%
Dollar edges green; gold rises; crude up ~1%; bitcoin off ~1%
U.S. 10-Year Treasury yield edges up to ~4.19%
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BENCHMARK TREASURY YIELD: CAN THE CLIMB CLEAR THE CLOUD?
The U.S. 10-year Treasury yield US10YT=R rose to a 12-week high on Monday as investors priced for a more robust American economy and less dovish Federal Reserve.
Yields have jumped since a much stronger-than-expected employment report for September led investors to price out the probability that the U.S. central bank will make further large interest rate cuts, following a 50 basis-point reduction last month.
The yield ended Monday at 4.182%. Now on Tuesday, it has hit a high of 4.222%, which coincides with its 55-week moving average. The yield has since backed away to around 4.19%, but is on track to rise for sixth straight week.
With this week's strength, the yield is now challenging a significant resistance zone in the form of the weekly Ichimoku Cloud:
Ichimoku Cloud is a technical indicator which displays support and resistance, identifies trends, and measures momentum. Utilizing midpoints of ranges, a number of lines are generated. Two of these lines are used to create Cloud boundaries. The entire cloud is shifted forward in time in order to provide a glimpse of future support and resistance.
Since closing above the cloud on a weekly basis in early February 2021, the yield had not ended a week below it until its early August break.
Thus, the recovery off of the 3.599% mid-September trough may still be seen as a counter-reaction as long as the yield tops out as it battles the weekly Ichimoku Cloud, which now resides in the 4.20%-4.33% area.
And the yield is pressing this zone as it appears stretched to the upside given its weekly win streak. The yield last rose six weeks in a row in March 2023.
The 200-day moving average is now initial support at 4.175% ahead of this week's low at 4.077% and the October 16 trough at 3.995%.
A weekly close above the cloud can instead suggest a major inflection back to the upside is underway.
(Terence Gabriel)
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FOR TUESDAY'S EARLIER LIVE MARKETS POSTS:
CAUTION! S&P POSITIONING HAS BECOME 'STRETCHED' - CLICK HERE
BETTING ON M&A? HERE'S WHAT TO OWN - CLICK HERE
WEAK START FOR STOXX, TECH CAPS FURTHER LOSSES - CLICK HERE
EUROPEAN BEFORE THE BELL: UNCERTAINTY OFFSETS POSITIVE EARNINGS - CLICK HERE
BONDS AND GOLD BEGIN COUNTDOWN TO US ELECTION DAY - CLICK HERE
US10YT10222024 https://tmsnrt.rs/4f5aFUg
(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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