#Bund - short term mixed, but long term higher yield is likely
As I wrote this morning on Twitter, I have a good reason to show you the yield chart, instead of the FGBL countinous chart this time.
Since we have FGLU7 (Sept contract) maturity next week, and there is a 287 points discount between FGBLZ7 (december) and FGBLU7, the price chart will soon become very distorted both in price and indicators.
Let's see the messages of the 10y German yield charts.
Weekly:
- Ichimoku is bullish (means bearish bond price action). Support zone is at 0,34 - 0,40 % yield.
- Heikin-Ashi signal has been swing bearish, yield dipped to 40 bps support (Kijun Sen). However by end of this week haDelta may give a momentum reversal signal. haOscillator is also quite low and may cross back up.
- EWO is bullish, MACD shows bullish consolidation.
I think in the long run this market will shift from previous 15-45 bps trading range into 45-70 bps range.
ECB must taper its bond purchase (QE) program, as for sure by March/April they completely run out of eligible German and Portugal bonds to buy. There is also a political issue for Draghi to do this, as so far Schauble and BuBa kind of supports him, saying that QE was reasonable, but recently the German higher court just announced that according to German constitution ECB violated the ban of monetary financing with its policy (the case goes to EU court). I am pretty sure the taper will happen, however the taper will be gradual, and will last until 2019. This will put some more pressure on Bund, but will not blow it up above 1 %.
Daily:
- Ichimoku is neutral, as Price is at Kumo cloud support. Resistance above is at 48 bps.
- Heikin-Ashi has bearish bias, but watch haOscillator. If it crosses back up above its center line, then yield will start to rise again. However a break below the cloud would send it to 30-33 bps.
- MACD histogram is ticking higher.
- EWO is bearish.
I defenately do not want to be long Bunds at all. Based on the long term weekly chart setup short German 10y makes more sense, as its yield will likely rise in the future.
The question is when to short it? For clarity watch price action and Heikin-Ashi signals on the daily time frame.
Since we have FGLU7 (Sept contract) maturity next week, and there is a 287 points discount between FGBLZ7 (december) and FGBLU7, the price chart will soon become very distorted both in price and indicators.
Let's see the messages of the 10y German yield charts.
Weekly:
- Ichimoku is bullish (means bearish bond price action). Support zone is at 0,34 - 0,40 % yield.
- Heikin-Ashi signal has been swing bearish, yield dipped to 40 bps support (Kijun Sen). However by end of this week haDelta may give a momentum reversal signal. haOscillator is also quite low and may cross back up.
- EWO is bullish, MACD shows bullish consolidation.
I think in the long run this market will shift from previous 15-45 bps trading range into 45-70 bps range.
ECB must taper its bond purchase (QE) program, as for sure by March/April they completely run out of eligible German and Portugal bonds to buy. There is also a political issue for Draghi to do this, as so far Schauble and BuBa kind of supports him, saying that QE was reasonable, but recently the German higher court just announced that according to German constitution ECB violated the ban of monetary financing with its policy (the case goes to EU court). I am pretty sure the taper will happen, however the taper will be gradual, and will last until 2019. This will put some more pressure on Bund, but will not blow it up above 1 %.
Daily:
- Ichimoku is neutral, as Price is at Kumo cloud support. Resistance above is at 48 bps.
- Heikin-Ashi has bearish bias, but watch haOscillator. If it crosses back up above its center line, then yield will start to rise again. However a break below the cloud would send it to 30-33 bps.
- MACD histogram is ticking higher.
- EWO is bearish.
I defenately do not want to be long Bunds at all. Based on the long term weekly chart setup short German 10y makes more sense, as its yield will likely rise in the future.
The question is when to short it? For clarity watch price action and Heikin-Ashi signals on the daily time frame.