Euribor – March 2010

Nicole Elliott from Mizuho Corporate Bank at 10/29/09

Comment: Schatz yields have dropped more than others over the last fortnight but with benchmark two-year yielding 1.276%, double their US counterparts, we feel there is still room to drop further. Euribor contracts are trading very neatly, the latest small sell-off contained by trendline, cloud and Fibonacci support. Price action since September looks increasingly like ‘triangle’ consolidation and, being a continuation pattern, hints at a break to new contract highs next month. Moving averages have yet to turn bullish again, and many may feel rates under the ECB’s target at 1.00% are untenable. Central banks are not infallible and have been known to misread market conditions.

Strategy: Attempt small longs at 99.060/99.000; stop well below 98.950. Add to longs on a sustained break above 99.165 for 99.250/99.320 medium term.