All eyes are on U.S. Treasury Bonds – Market Overview

All eyes are on U.S. Treasury Bonds – Market Overview

Yesterday, yields of U.S. Treasury Bonds hit new highs, with the 10-year benchmark surpassing the 1.60% mark. Today's session saw it fall to 1.53%.

In this sense, it will be crucial to follow the auctions that will take place today with a 3-year bond auction and especially tomorrow with a 10-year bond auction.

Suppose the demand for these auctions is not high enough to push down the yields, and they continue on this trend. In that case, the market could return to the dynamics experienced yesterday with downward pressure on stock indices and a strengthening of the U.S. Dollar.

Meanwhile, the markets experienced corrections from yesterday's movements.

The U.S. Dollar strengthened, and its price against the euro exceeded the 1.1900 zone after having touched a minimum of 1.1830 yesterday.

From a technical analysis perspective, EUR/USD broke lower after trading below the 100-day SMA line, currently located at 1.2030, but rebounded. The daily RSI reached the 30 zone, a level that had not been seen since March 2020. The rebound also comes from a wide price concentration zone between 1.1750 and 1.1870.

Therefore, it could perhaps be considered a purely technical correction without the fundamental data has changed substantially. There are fundamental causes that might generate pressure on the euro, such as the ultra-expansive monetary policy of the European Central Bank, which not only remains in place but could grow stronger if the outflows of European bonds that we have witnessed in previous days should intensify. Additionally, there have been talks in the market about the ECB increasing the pace of asset purchases, which has not been officially confirmed.

On the other hand, today, the fourth quarter's GDP data for the Euro Area was published, showing a year-on-year fall of 4.9%, somewhat better than the expected -5% figure.

Together with other fundamental factors, this data contributed to a rise in European Stock Indices, which perform better than the North American ones, breaking the correlation that they have traditionally experienced in recent months.

The fact that inflationary expectations in Europe are not as high as those in the United States and that the levels of European bonds yields have not experienced such high increases, together with expectations of a recovery in the economy due to the administration of vaccines and implementation of the Next Generation aid package are the main reasons for this behaviour.

Elsewhere in Germany, DAX has reached a new all-time high in the 14452 zone and technically does not find any benchmarks that can be considered resistance with RSI levels relatively below overbought levels.

Sources: ForexLive.com, Investing.com.

Le informazioni contenute nel presente documento sono redatte da Miguel A. Rodriguez e non costituiscono né devono essere interpretate come suggerimenti di investimento. Le informazioni di cui al presente documento costituiscono comunicazioni di marketing generali a scopo informativo e, in quanto tali, non sono state preparate nel rispetto dei requisiti di legge che promuovono le ricerche di investimento indipendenti. Inoltre, non sono soggette ad alcuna limitazione sulle transazioni condotte in anticipo rispetto alla divulgazione delle ricerche di investimento in questione.

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