Euro−Bund future – Dec 2009

Nicole Elliott from Mizuho Corporate Bank at 10/27/09

Comment: Benchmark Schatz yields seem to have got the message, easing from this month’s high at 1.470% to 1.330% (though there is still plenty of room to catch up with their US and Swedish counterparts which are yielding 1.000% a record low 0.680% respectively). This Bund futures has retraced more than we had allowed for yet the move is undoubtedly corrective. Hopefully the combination of Fibonacci and channel support, plus the rising Ichimoku ‘cloud’, will stem the decline despite yesterday’s drop turning moving averages bearish. The contract is now oversold and momentum is bearish. Note also that the Lagging Span should gather support from the candles, averages and Fibonacci support. This is seen as a buying opportunity for an eventual re-test of contract high.

Strategy: Buy at 121.00; stop well below 120.50. Add to longs on a daily close above 121.65 and again above 123.00 for 124.00/124.60 and probably a lot more before year-end.