US 10Y TREASURY PUTTING IN A CLASSIC "BOTTOM" & "REVERSAL" PATTERN

After breaking through the TNX's long term overhead resistance we fully expected the long term overhead resistance to be tested since technically what was 'resistance' often becomes support after a breakout.  Additionally, since the TNX was coming from its upper 12 & 24 MMA Bollinger bands it is not unusual to complete a "Bollinger Cross" in competing the retest.  The TNX is exhibiting all the normal "bottoming" and "reversal" process characteristics.

A retracement move of the downward trend since 1987 is both expected and overdue, especially considering the growing US Budget deficit and its dependency on foreign buyers.

Chart Courtesy of ZeroHedge

We see 10Y Note yields rising due to four potential drivers:

  1. Trade War Inflation Pressures,
  2. Heavy US Treasury Supply due to growing deficits,
  3. Weaker Foreign Buying
  4. Forced Liquidation of Entitlements held in US Treasuries.

There seems little doubt that over the next few years either US Treasury yields rise or the US Dollar falls or some combination of both!

 

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