10-Year Treasury Notes Change Trend to Up after Fed Releases Latest Statement

September 10-Year U.S. Treasury Notes rallied on Wednesday after the Fed passed on an interest rate hike. However, it did issue upbeat commentary about the economy. Initially, investors read the Fed statement as hawkish, leading to an intraday break. The rally into the close, however, indicates that investors weren’t convinced the central bank would raise rates at its September meeting.

Going into the last day of the Fed’s two-day meeting, investors had priced the probability of a September interest rate hike at 20%. After the Fed issued its monetary policy statement, the probability of an early rate cut dropped to 18%. Investors also lowered the odds of a December rate hike.

The main trend is up according to the daily swing chart. It turned up on Wednesday when the market took out the last swing top at 132’16.5. The new swing bottom is 131’27.5.

The main range is 130’21.5 to 134’07.5. Its retracement zone is 132’14.5 to 132’01. This zone attracted a lot of activity the last two weeks so we have to conclude that this zone is controlling the near-term direction of the market.

The short-term range is 134’07.5 to 131’19.5. Its retracement zone at 132’29.5 to 133’07.5 is the primary upside target. Traders need to watch the price action on a test of this zone because aggressive counter-trend traders may try to produce a potentially bearish secondary lower top.

Based on Wednesday’s close at 132’17.5, the direction of the T-Note market today is likely to be determined by trader reaction to the 50% level at 132’14.5.

A sustained move over 132’14.5 will indicate the presence of buyers. This could trigger enough upside momentum to challenge the short-term 50% level at 132’29.5. Overtaking this level could lead to a test of the resistance cluster at 133’07.5.

A sustained move under 132’14.5 will signal the presence of sellers. The first target is a downtrending angle at 132’07.5. Crossing to the weak side of this angle will put the market in a bearish position with the next target the main Fib at 132’01.

Taking out 132’01 will indicate the selling is getting stronger. This could trigger breaks through the two main bottoms at 131’27.5 and 131’19.5. This would turn the main trend back to down.

Watch the price action and read the order flow at 132’15. Trader reaction to this level will tell us if the buying is getting stronger after the Fed statement, or if the sellers are regaining control.