CPI week for US 10-year yields
Since my last idea on US10-year yields the Fed opted to leave the federal funds rate unchanged at 4.50% and the latest NFP print came in at a lackluster 143 thousand in January, down from 307 thousand in December. These two events provide a contradicting impact for US longer term yields as the weaker labour market results is indicative that the Fed may have to continue cutting rates to stimulate the economy, which is positive for bonds, while the Feds decision to pause rates plays the ball into the court of a move higher in yields towards 5.00%.
US 10-year yields touched a low of 4.4% last week before the 50-day MA at 4.50% provided support. The 50-day MA is my critical level to watch as a break below this level will invalidate my ideas calling for a move towards 5.00%. A failed move above 4.50% will allow bond bulls to pull yields onto the 200-day MA at 4.25% which coincides with the blue downward neckline and the 61.8 Fibo retracement.
A break above 4.50% will however support my idea of a 5-wave impulse higher towards 5.00%.
The week ahead has two major events on the cards that will influence the US bond market. The first of which is Fed chair Powell’s testimony before congress. I’m not expecting anything new here besides the usual gibberish and double-speak but keep an ear out for the status of the Fed’s taper progress and any comments on the low liquidity levels of the Fed’s reverse repo facility.
The next event is where the significance lies, the US CPI print for January which is expected to remain unchanged at 2.9%, just like it did back for the December print. Inflation has been ticking higher since October last year, almost right after the Fed started their cutting cycle and anything other than an inline or lower than expected CPI print will have the US 10-year yields packing and making its way to 5.00% since it will indicate that the Fed will stay higher for longer.
Also worth noting is that the US 10-year yield topped out at 4.8% when the CPI print came in as expected at 2.9% so this time around a stronger than expected print may serve to mark the bottom at 4.4%. (Always remember, CPI is a lie).
US 10-year yields touched a low of 4.4% last week before the 50-day MA at 4.50% provided support. The 50-day MA is my critical level to watch as a break below this level will invalidate my ideas calling for a move towards 5.00%. A failed move above 4.50% will allow bond bulls to pull yields onto the 200-day MA at 4.25% which coincides with the blue downward neckline and the 61.8 Fibo retracement.
A break above 4.50% will however support my idea of a 5-wave impulse higher towards 5.00%.
The week ahead has two major events on the cards that will influence the US bond market. The first of which is Fed chair Powell’s testimony before congress. I’m not expecting anything new here besides the usual gibberish and double-speak but keep an ear out for the status of the Fed’s taper progress and any comments on the low liquidity levels of the Fed’s reverse repo facility.
The next event is where the significance lies, the US CPI print for January which is expected to remain unchanged at 2.9%, just like it did back for the December print. Inflation has been ticking higher since October last year, almost right after the Fed started their cutting cycle and anything other than an inline or lower than expected CPI print will have the US 10-year yields packing and making its way to 5.00% since it will indicate that the Fed will stay higher for longer.
Also worth noting is that the US 10-year yield topped out at 4.8% when the CPI print came in as expected at 2.9% so this time around a stronger than expected print may serve to mark the bottom at 4.4%. (Always remember, CPI is a lie).
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