Bond Traders Try To Read Fed Tea Leaves
Today’s Spotlight Market
U.S 30 Year Bond traders were eagerly waiting for the release of the minutes of the Federal Open Market Committee this week. While few traders were expecting a surprise rate hike for June, the release of the minutes and press conference are always scrutinized for hints of upcoming rate increases.
Fundamentals
Traders viewed the release of the minutes as slightly dovish, with the Fed cutting back on their expectation of GDP growth to a revised growth figure of 1.8% to 2%. The Fed also reduced their expectation for continued drops in the unemployment rate, they are now expecting 5.2%-5.3%, revised upward from as low as 5%. However, this is tempered by a continuing rise in the labor force participation rate, a bullish signal for the economy. Traders are also quite interested in the timing of future rate increases, opinions are divided if the first increase of 25 basis points will come in September or December. If there is a rate increase in September, then traders will be speculating on the future timing of rate increases, with the potential for yet another rate increase in December being the most bullish viewpoint.
Technical Notes? -? View Today’s Chart
Turning to the 3 month continuation chart, we see several bearish signals. First, the 20 day Simple Moving Average crossed below the 50 day Simple Moving Average back in May. Second, 30 Year Bond prices are trading below the 20 day Simple Moving Average. Finally, the 14 Day Relative Strength Index is at a very weak 30.41. The 20 day Simple Moving Average has been a resistance level lately, as prices struggle to break above. Currently support can be found at 147-16 while resistance is at 151-29.
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