A chart of the 10-year yield spread between Italy and the US is developing a pattern that suggests buyers are gaining strength, according to Estêvão Oliveira, Head of Technical Strategy at Haitong Bank.
Oliveira points out that each time a key resistance area (at around the 0 level) has been tested over the past two years, the lows that follow tend to be higher than the previous ones (see Chart). He says this sequence of higher lows is a common sign of buyers gaining strength.
Furthermore, he thinks that each time the horizontal resistance level is tested it tends to make it weaker, which will eventually result in a an upside breakout. His projection for this formation suggests a Wave 4 move to just above the 1.00% level.