Market Economics | Interest Rate Strategy - BNP PARIBAS ...

Technical Analysis – Interest Rates & Commodities
Bond & Short-Term Contracts
• Europe 10y: Breaking slightly above key 3.09/3.12 (LT 38.2% & MT 61.8%), opening the way for 3.25 area
• US 10y: Toppish around key 3.37 (MT 61.8%) within a ST triangle (3.25/3.44) and below 3.63 (LT falling res)
• Short-term contracts m1: MT toppish bias on ED & Euribor, but a ST rising one on ED while Euribor is down
Equities & Commodities
• WTI (Cl1): Sill up MT within MT rising channel but still stalling around 91.86 wave “A” top, with risk now of 2-tops
• Equity markets: MT positive bias persists but a ST toppish tone is developing. Larger fall is needed to turn down
US 10y: Toppish around key 3.37 (MT 61.8%) with risk towards ST 38.2% MT Trend: Up Range: 3.20/3.45
MT SCENARIO remains up
Market remains up oriented MT within a MT
rising “C of ABC” scenario which is likely to
send it towards key 4.00/4.07 (April top & LT
61.8%) initially and then key 4.59 (LT falling
channel res). A break above 3.44 (daily
triangle res) and the key 3.63 (4-year falling
resistance) level is needed to strengthen this
MT bearish scenario
2.80 4.00/4.07
ALTERNATIVE SCENARIO...ST correction
It fails to extend the rise beyond 3.63 (LT
falling resistance line), capped by top
reversal, and starts a ST consolidation
towards 3.09 (ST 38.2%) initially. First
positive step would be a break below 3.25
(wave “A” low & ST triangle support)
STRATEGY
Enter long on 3.40 area, S/L 3.46, for
3.15/3.25 or buy stop 3.25 break, S/L 3.31,
for 3.05/3.10
US/EUR 10y bond: Is it now developing the main falling wave ? MT Trend: Down Range: 15/30
MT SCENARIO is down
After the 5 waves down move (major wave
“A”?) which reached the key 0.2/0.6 support
area, it has started a correction (major wave
“B”?) above the MT falling wedge. This move
may end close to key 56.2 (ST 61.8%) and
the main risk now is to have started the main
falling wave “C” towards 8.2 (wave “A” low)
initially and then key -21.4 (LT 61.8%). ST
bearish confirmation will come from a
sustained break below 22.6/24.5 (61.8%)
-21.4 4.2 => 56.2/57.0
ALTERNATIVE SCENARIO.Wave B extends
Rising correction (major wave “B”?) is not
over and rise resumes from key 22.7/24.5
area towards 45.7 top again and then towards
critical 56.2 (ST 61.8%). A break then above it
would call for a move towards key 85.8/85.9
(wave “5” top & LT falling channel resistance)
STRATEGY
Wait for a rebound to enter short
Christian Sené 20 January 2011
Market Mover, Non-Objective Research Section
56
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