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Minor Support Levels Just Under Rates to Hold Today

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Chart-595The Treasury market saw a German October ZEW Current conditions index release overnight that showed a moderately large jump from 55.1 to 59.5 and that joins other recent data from Germany showing growth. Chicago Fed President Evans in Sydney suggested that US inflation is not at satisfactory levels yet but he also suggested that US fundamentals appear to be good. Evans also suggested he would be “fine” with a hike in December. Therefore it would seem like Treasuries face a slightly bearish fundamental environment to start today. On the other hand, the US economic report slate it relatively thin today and it is possible that technical issues might serve to drive Treasury prices. In looking at a monthly chart it should be noted that Treasuries have pulled down right on top of a potentially critical up-trend channel support line of 163-15 and the failure to hold above that level could tick off another technical signal of a major top. An issue that could have a limited impact on Treasuries is the kick off of the earnings cycle with Alcoa earnings. The North American report schedule will remain quiet after the US and Canadian holidays, and will be highlighted by September Canadian housing starts which are forecast to show a small uptick from the August reading. The trade will see also see a weekly private retail chain store sales release early on and the Fed’s labor market condition index will be released later in the session.

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