10-Yr U.S. Treasury Notes (TY) Futures Technical Analysis – January 2, 2014 Forecast

March 10-Year U.S. Treasury Notes are trading lower, but the failure to follow-through to the downside suggests an impending short-covering rally. Fundamentally, selling pressure has hit the market recently because of the Fed’s recent announcement to taper. Oversold conditions, however, may help to turn this market higher today.

This morning, the U.S. announced that weekly jobless claims fell 2000 to 339,000. There was very little reaction to the news. Traders may be waiting for today’s December ISM Manufacturing PMI at 10:00 a.m. ET along with November Construction Spending. Manufacturing PMI may show a decline from 57.3 to 56.8. Construction spending is estimated to have declined slightly to 0.7% from 0.8%.

Technically, the recent sideways action suggests bottoming action, but there has to be follow-through to the upside. The main trend is down on the daily chart, but a move through 123’09 will turn the main trend to up.

Given the short-term range of 124’24 to 122’24.5, the main upside target is the retracement zone at 123’24.5 to 123’31.5. A downtrending angle from the 124’24 top at 123’20 is the first upside target today.

If traders can’t take out 123’09 then look for T-Notes to drift lower. A sustained move through 122’24.5 will put the market in a weak position. This could trigger an eventual move into 122’03 over the near-term.