Friday, July 11, 2014

Germany in World Cup, but Bund Luster Could Tarnish

One only needed to watch the first half of the German/Brazil Semi-final contest before growing weary from seeing Brazilian children and adults crying.  German Bunds have enjoyed equally spectacular success as yields have moved quite close to the mid-’12 record lows. 

The Bund is within spitting distance of the June 2012, 1.12% record low yield (source tradeweb).  As such, technical formations which suggest possible trend reversal are given greater attention.  One such reversal signal was given yesterday in the bearish ‘shooting star’ that saw intra-session gains evaporate and the contract closed not far from opening level. 

Both trading sessions following Monday’s bullish break above recent highs have seen only small differentials between opening and closing levels.  This suggests some disquiet on the part of the bullish contingency.  The inability to hold onto intra-session gains yesterday highlights the potential for sentiment change on the part of these longs. 

Today the Sep Bund (RXU4) opened above Thursday’s close and leaves room for a further bearish reversal signal in a ‘bearish engulfing’ should RXU4 settle below 147.54.  A settlement there would likewise confirm the bearish implications of the ‘shooting star’.

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