Can the 2 Year Treasury Note Rally?

CBOT_DL:ZT1!   2-Year T-Note Futures
The recent rally of the 2-year Treasury has unfolded following Federal Reserve Chair Jerome Powell's shift toward a slightly dovish stance in the latest policy meeting. Powell's rhetoric emphasized the importance of proceeding cautiously with the path of interest rates, prompting a surge in demand and short covering in the bond market.

Against this backdrop, the persistent tightening of financial conditions has compounded concerns, with market participants closely monitoring the impact on economic growth. The rally in the 2-year Treasury reflects a repricing in the bond market, as traders and investors feel that the Fed is that closer to the end of this Quantitative Tightening cycle.

Moreover, the specter of shrinking disposable incomes has cast a shadow over consumer spending, exacerbating concerns about the sustainability of economic growth. As disposable incomes dwindle, consumers typically curtail their spending, potentially dampening overall economic activity.

As market participants navigate these uncertain waters, economic data will continue to be a headwind for Treasuries, and Equities.

When looking at the technicals of the 2 year Treasury, there is major support from 101 ‘2 – 101 ’10. A break and close below this level would likely be coupled with better than expected economic data, and higher than expected inflation numbers.

Major resistance was previously the trend line going back to the March 24th highs. After breaking and closing above this level, traders should look for a break and close above 101 ’25 to see further momentum.

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