10-Yr U.S. Treasury Notes (TY) Futures Technical Analysis – January 16, 2014 Forecast

March 10-Year U.S. Treasury Notes are trading flat in the overnight session. Traders are holding the market inside yesterday expanded range as they await a few key economic reports today. At 8:30 a.m. ET, the U.S. will release its latest CPI data. This report is expected to show inflation declined slightly from 0.2% to 0.1%. Weekly Unemployment data is also going to be released. This report is expected to show that claims declined slightly to 327K from 330K. At 10:00 a.m. ET, the Philadelphia Fed Manufacturing Index is expected to show an increase from 7.0 to 8.8. Finally, outgoing Fed Chairman Bernanke is scheduled to deliver a speech at 11:10 a.m. ET.

The strengthening economy is putting pressure on T-Notes this week after last Friday’s weaker-than-expected Non-Farm Payrolls report triggered a strong price surge. Investors started to price in the possibility the Fed would refrain from tapering in January. Tuesday’s strong retail sales report and yesterday’s spectacular Empire State Manufacturing Survey made investors forget about the jobs data as T-Notes fell sharply.

The main trend is up on the daily swing chart, however, yesterday’s price action created a new swing top. The new main range is 122’24.5 to 124’20.5, making the retracement zone at 123’22.5 to 123’15.5 the new downside target.

On Wednesday, the market took out an uptrending support angle. Today, this angle moves up to 124’04.5. A failure to overcome this angle moving up 4/32nds per day could mean an eventual test of another potential support angle moving up 2/32nds per day at 123’14.5.

Since topping at 124’20.5, the T-Notes have been walking down a steep Gann angle at 123’28.5 today. In pre-market trading, the market opened on the strong side of this angle, suggesting the start of a possible retracement into another angle at 124’08.5.

A short-term range may also be forming between 124’20.5 and 123’24. If this range holds, then look for a possible 50% retracement to 124’06. This price forms a potential resistance cluster with the downtrending angle at 124’08.5. Sellers could re-emerge following a test of this area.

Look for volatility to pick up when the CPI and unemployment claims data is released at 8:30 a.m. ET. The tone of the day, however, should be determined by how traders react to the Philly Fed data. A stronger than expected number like yesterday’s Empire State Survey could trigger a sharp break into 123’22.5 to 123’15.5. A weak report will likely mean a fast rally to 124’06 – 124’08.5.