Chart of The Day US10 Year Yield

US10 Year Yield Probable Price Path & Potential Reversal Zone

US stock benchmarks ended on a mixed note on Monday as investors continued to rotate out of technology shares and piled into cyclical stocks spurred by a bullish recovery outlook after the Senate passed the $1.9 trillion stimulus bill. The Dow rose by as much as 652pts to a new intraday record before pulling back to close 306pts or nearly 1.0% higher d/d. The broader S&P 500 lost 0.5%, dragged down by the tech sectors. NASDAQ fell 2.4% to correction territory. The selloff in treasury resumed after some stabilisation last Friday. Yields rose modestly across the curve by 1.9 to 5.5bps. 10Y UST yield last traded 2.5bps higher at 1.59%, its highest level since February last year.

The greenback strengthened across the board; losses were led by CHF and EUR. The gain in the dollar index (+0.4%) extended into the fourth consecutive session. Gold prices faltered amid stronger USD. Futures plunged 1.2% to $1678/oz, marking its fourth day of down moves. Crude oil prices retreated from recent highs as the dollar went up, reversing some prior gains. Brent crude went as high as $71.38/barrel on Saudi’s crude facility attack before settling at $68.24/barrel (-1.6%). Similarly, WTI settled 1.6% lower at $65/05/barrel. Treasury Secretary Janet Yellen said that the $1.9 trillion stimulus bill, now being sent back to the House for approval is unlikely to cause an inflation problem, adding that there are “tools to deal with that” if it turns out to be inflationary.

During the London session we have seen yields reverse and feed directly into the dollar and its major counterparts, we have also seen a significant uptick in risk sentiment with Nasdaq futures reversing strongly in morning trade, after entering corrective territory yesterday.

From a technical and trading perspective, US10 Year yields have reversed from a resistance at 1.62% this represents the 78.6% Fibonacci retracement of the pandemic decline last March along with projected trendline resistance, as this area continues to cap look for a pullback to test the 1.40% weekly projected trendline support and weekly projected range support. Fresh demand around 1.40% would set the stage for the next extension higher, initially targeting 1.70%enroute to a grind higher to test 1.90%, en-route to ultimately test but fail to find sufficient support just above 2.00% as highlighted in the chart, only a loss of 1.30% would suggest a false upside break and further consolidation into the 1.30/1.00% range. This Yield move feeds directly into the Dollar view expressed yesterday.

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