T-Bonds Futures Set up for Upside Breakout

June 30-Year U.S. Treasury Bonds continue to be supported by the Fed’s dovish outlook for future interest rate hikes and the U.S. economy.

The Federal Open Market Committee on March 16 declined to rate its interest rate target, with members also cutting back the future trajectory from the four hikes predicted in December to two. The forecast, included on the so-called dot plot in the Summary of Economic Projections, brought the Fed closer to the market, but not quiet all the way in a continuing conflict that some say has contributed to market instability.

According to the Fed Funds market, there’s a 52-percent chance of a rate hike in July. The September meeting, after which Chair Janet Yellen hosts her quarterly news conference, is a stronger bet, with a 60 percent chance.

Now that an April rate hike has been taken off the table and the Fed seems to be in no hurry to raise short-term rates, the June 30-Year U.S. Treasury Bond contract should continue to find support.

The main trend is down according to the daily swing chart, but momentum has been to the upside since March 14.

The main range is 151’15 to 169’12. Its retracement zone at 160’14 to 158’10 is the primary downside target. The recent low at 160’30 fell a little short of the 50% level at 160’14.

The short-term range is 169’12 to 160’30. Its retracement zone at 165’05 to 166’05 is the primary upside target.

Based on yesterday’s close at 162’23, the direction of the T-Bond market today is likely to be determined by trader reaction to the downtrending angle at 163’04.

A sustained move over 163’04 will signal the presence of buyers. This could create enough upside momentum to trigger an acceleration to the upside with the next target the short-term 50% level at 165’05.

The inability to overcome 163’04 will indicate the presence of sellers. This could lead to an intraday pullback into 162’04 to 161’27. If this market is headed higher over the near-term then aggressive counter-trend buyers will show up on a test of the zone in an effort to form a secondary higher bottom.

Watch the price action and read the order flow at 163’04 today. Trader reaction to this angle will tell us if the bulls or the bears are in control.