From The Charts – BOND YIELD SPREAD

• alaidi
• December 16th, 2010

US-GERMAN 10 YR YIELD SPREAD (US minus German) breaks further above its 200-day MA for the 1st time in 5 months. The daily chart shows the spread has formed a possible Head & Shoulder formation, with the right shoulder around 45-50 bps, which means that a CLOSE ABOVE 50 bps would be necessary to invalidate this potentially bearish formation. Some may say a close only needs to be above 43-44 bps for the shoulder to be broken. So while the media emphasis is on soaring US bond yields, we must focus on the US-GE spread, whose daily correlation with $EURUSD stands at -0.80. My bearishness on $EURUSD remains intact since Nov 23 as all the 55-WMA and Nov trendline continue to hold.

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Tickers: $EURUSD, bond yield spread

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