Forex Investment and Currency Trading

Key Observations and Themes:

• Interest Rate Bottom Line: A weekly close below the 2008 low at 3.34 would confirm a double top pattern in 10-year U.S. yields and affirm the bearish resolution of a symmetrical triangle pattern. This outcome would signal afurther increase in risk aversion and target 2.86 as a measured move objective
• 50% Fibonacci retracement of the Q2 2007 –Q1 2008 decline at 4.26 stalled an upside correction in U.S. 10-year yields in Q2 2008.
• With a double top forming against this level, recent price action has caused the bearish resolution of a symmetrical triangle pattern.
• The break below the triangle base at 3.66 has also caused yields to pierce asecondary support level at 3.56 – which was 76.4% retracement of the Q1 –Q2 2008 advance.
• All of this took place as the RSI study produced a bearish trend reversal.
• These three bearish developments have generated enough downside momentum to cause yields to break below this year’s low at 3.34.
• A weekly close below this level would be significant – as it would suggest that market tensions and risk aversion are rising from already elevated levels.
• This would then highlight the 2003 low at 3.11 as the next significant downside target for U.S. yields, followed by the triangle pattern objective at 2.86 and 2.60.
• Resistance at 3.34 and 3.66 is expected to attract selling interest in the current environment.
• Yields will have to register a weekly close above the triangle top at 3.93 in order toproduce a trend reversal that would argue for a re-test of the double top at 4.26.