Rate differentials have more room to go...Ride the Pig

From a technical perspective the spread US/German spread differentials have looked corrective since Q418. In what is a textbook example of Elliot Wave in action, the spread completed a 5 wave sequence at the highs in November 2018. The retrace held 38.2% of the move, forming a Wave B and opening up room for Wave C to reach 2.179bps.

We are in entering strong resistance levels which will attract a lot of selling interest. Tracking very closely here for any early signs of Fed/ECB hints, as long as we remain in the same flows the natural path will eventually run towards 2.179bps which would be the area to watch for signs of a meaningful base.

Best of luck those positioning for Fed/ECB this month.

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