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The News & The US T-Bond

By Tamar Mehr

We are in a period of high volatility news this week which is expected to impact the market. In the UK, the result from Prime Minister Theresa May’s election gamble looks to have not paid off with early results (as of 9:05am AEST) suggesting a hung parliament. It is still early and only a small percentage of the seats have been allocated, however there still remains the potential to affect the Pound and the UK 100 Index. Meanwhile, in the US, the former FBI director sacked by President Donald Trump’s testimony before the Senate Intelligence Committee is being closely watched.

In times of uncertainty, traders and investors tend to look at safe haven assets, such as Gold, the Japanese Yen and Treasury Bonds. With the current political news, as well as reports of China renewing its purchase of US debt, I’m going to take a look at the US T-Bond (30yr) from a technical point of view.

Let’s start with a top-down approach and take a look at the monthly chart. This market is in a long-term uptrend. We had a strong pullback, which passed the buy zone (the area between the 10 and 20 Moving Averages), and we found support for several months at the strong level of around 151.

We get a clearer picture of the market reaction to this level looking at the weekly chart, where we can also spot a new uptrend on this timeframe already in place. We can also identify the resistance level of around 156, close to where an over-extended price action is trading at the moment.

Let’s take a closer look at the market reaction to this resistance level, by going down the timeframes into the daily and the 4 hour charts.

On the daily we can see the price consolidating underneath this resistance level, but it’s the 4-hour chart that gives us more detailed information about this consolidation.

The 4 hour chart has made equal high, and yet the momentum indicators are diverging, which could indicate a deeper pullback is on the cards. And that could translate to a pullback into the buy zone on the daily chart.

My preferred scenario for this market is a further pullback to release some of this buying pressure, and then another test of this resistance level.

During this period of potential political volatility, I will be looking for long trading opportunities, either as a momentum breakout, or as a pullback to test this level from above. 

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