The rally for sovereign debt has passed an important milestone, with the yield on Germany’s benchmark 10-year bonds hitting zero for the first time and briefly entering negative territory. The strong demand is standing out in cautious trade ahead of a series of policy meetings at major central banks and rising uncertainty over whether the U.K. will stay in the EU.
The Federal Open Market Committee is set to begin a two-day meeting on interest rate policy. Traders will eye a fresh batch of economic projections and remain focused on when the Fed will next raise rates, although they are discounting any chance the central bank will act at the gathering. Expectations fell significantly after June’s dismal employment report, which set off fresh concerns about the strength of the economy.
In Asia, Japan -1% to 15859. Hong Kong -0.6% to 20387. China +0.3% to 2842. India flat at 26,395.
In Europe, at midday, London -1.2%. Paris -1.3%. Frankfurt -0.7%.
Futures at 6:20, Dow -0.2%. S&P -0.2%. Nasdaq -0.3%. Crude -1.3% to $48.27. Gold -0.3% to $1282.90.
Ten-year Treasury Yield -3 bps to 1.58%
(Source: Seeking Alpha)
Early rally following lower gap open faded as price could not maintain solid bid above Friday’s settlement (2087.75). Retrace and violation of 2076 handle accelerated selling during afternoon session pushing lower to hit 2070.50 Low of Day price projection.
Today is Cycle Day 2 (CD2)…Strong negative price momentum may take price lower to find secure low before any rally can begin…Early key marker for support will be 2060 – 2062 zone. Should price find strong enough buy response then a relief rally has chance to develop. Price would at minimum need to clear and convert prior low (2068.75) before any price stabilization can occur.
Range Projections and Key Levels: Sept (U) Contract
HOD Range Projection: 2098.50; LOD Range Projection: 2055.80; CD2 Max Penetration Level: 2098.50; CD2 Max Violation Level: 2062.00; Cycle Day 1 Low: 2068.75; 3 Day Central Pivot: 2089.50; 3 Day Cycle Target: 2098.50; 10 Day Average True Range: 15.95
**Note: The odds highlighted are NOT predictions or trade recommendations, rather a guide based upon historical observed occurrences.
Today’s Hypotheses: June (M) Contract
*****The levels outlined below are more general framework within a larger range…They are to be used are reference prices from which to consider trade opportunities, not hard trade levels.
Scenario 1: IF price can hold at or above 2060 – 62 zone, THEN initial objective is to recapture PL (2068.75) and convert to support. Should this develop, layered upside levels are: 2071.00…2074.25…2078.00
Scenario 2: Failure to convert PL (2068.75) to support and/or violation of 2060 – 62 zone opens door for further selling with lower extreme target measured at 2055 handle. Deep extreme runs down to 2050 SPOT.
Trade Strategy: Our tactical trade strategy will simply remain unaltered…We’ll be flexible to trade both long and short side from Decision Pivot Levels. Continue to focus on Bull/Bear Stackers and Premium/Discounts. As always, remaining in alignment with dominant intra-day force increases probabilities of producing winning trades.
Stay Focused…Non-Biased…Disciplined ALWAYS USE STOPS!
“Knowing is not enough, We must APPLY. Willing is not enough, We must DO.” –Bruce Lee
*****This trade strategy report is disseminated for “education only” and should not be viewed in any way as a recommendation to buy or sell futures products.”
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