Wednesday September 8, 2010 - 18:11:16 GMT
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Treasury Bond Weakness could mean another Leg Down
Renewed demand for risky assets is helping
to drive the December Treasury Bonds lower. Technically the T-Bonds may have
made a secondary lower top on Tuesday after testing the retracement zone at
133â€™03 to 133â€™22. The actual rally to 133â€™12 completed a 50% retracement of the
135â€™19 to 130â€™12 range.
If a secondary lower top has been formed
and appetite for risky assets continues to grow, then look for this market to
break lower. A trade through 130â€™12 will not only take out a swing bottom to
turn the main trend down, but it will also put the market on the bearside of a
50% level, setting up a further decline to at least 129â€™11.
Ahead of the release of this afternoonâ€™s
Federal Reserve Beige Book, the U.S. Dollar is trading weaker against most
major currencies. This report shouldnâ€™t be a market mover, but traders should
read it to gain a little more knowledge into what the Fed looked at when it
made its recent Federal Open Market Committee decisions.
The Japanese Yen is under pressure versus
the U.S. Dollar at the mid-session after rising to a 15-year high against the
Greenback. Strong moves in the equity markets are helping to revive the
carry-trade too. The Yen also took a hit this morning after Japanese government
officials expressed apprehension about the rise in its currency.
Technically, the September Japanese Yen is
forming a closing price reversal top. This pattern, if confirmed, often
triggers the start of a two to three day correction with a minimum objective of
50% of the last swing up. If this is the case this time, then look for a
short-term retracement to at least 1.1877 or maybe as low as 1.1831.
The Japanese Yen chart will get most
interesting if 1.1867 is broken. At this time, the Yen is set up for a weekly
reversal, but a close under 1.1867 will put the market lower for the week,
forming a possible major top.
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