The current rally in the US 10 Year Yield is unlikely to overcome its long-term downtrend, says Andy Dodd, Head of Technical Research at Louis Capital Markets.
Dodd stresses there is a strong long-term downtrend in the US 10 Year Yield that goes back to 1981 (see Chart 1). Despite this, he says there is still scope in the medium-term for rallies/pullbacks towards the prior 2013/14 peak at around 3.05, which is also near resistance from the falling trendline (see Chart 2). A break above 3.05 on the monthly chart would, he says, confirm a bullish reversal pattern.
However, Dodd says a Shooting Star candlestick that appeared on last week’s chart lends weight to the idea that the current rally will not make it above the long-term downtrend. As such, Dodd thinks 3.05 remains a good area to go long bonds.
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