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Summary
- Prices and RSIs rose across the curve this past week
- This has led most RSIs to approach the 70 threshold, increasingly so in the short end of the curve, the level which indicates the contracts being overbought.
- The FV RSI is now at 69.1, with the TU RSI now at 71.9, indicating that the former is near being, and the latter is, overbought.
- Indicators suggest that prices are more likely to rise further under these price and RSI conditions.
Using Positioning Data to Find Key Futures Levels
We look at net positioning moves in our Cross-Market Positioning Report. Here, we use an alternative model for analysing CFTC futures data based on the key levels at which fast money net positioning has changed. Our aim is to identify support and resistance levels.
The current analysis suggests (Table 1):
- WN (135.31): Both RSI and price rose sharply from the previous week, with the current price well above all the biggest net long and net short levels seen over the 3-month, 6-month and 12-month lookback periods. The WN price rose 58% of the time the following week on previous occasions where the RSI rose and was at this level. The RSI sits on the right-hand side of the 12-month distribution.
- US (126.06): Again, both the US RSI and price rose sharply this past week, with the RSI sitting on the right-hand side of the distribution. The US price rose 55% of the time the following week on previous occasions where the RSI rose and was at this level. The US price still sits well above the biggest net long and net short levels across all the lookback periods.
- TY (114.45): As with WN and US, both the RSI and price rose this week. Also similarly, at the current RSI level (and after rising from the previous week), TY has risen 53% of the time the following week. The TY price is above each of the long and short lookback levels, with the RSI sitting on the right-hand side of the distribution.
- FV (109.98): With both the price and RSI rising, at this RSI level and after an RSI rise, prices rose 53% of the time the following week. Additionally, the current price is well above the biggest net long and net short levels across all the lookback periods. And, at 69.1, the RSI is very close to the 70 overbought level.
- TU (103.84): The TU price and RSI both rose sharply this week, with the RSI at 71.9 indicating that the contract is overbought. At the current RSI level and after an RSI jump, TU has risen 57% of the time the following week, flagging further strength. TU is also well above most of the biggest net long and net short levels across all the lookback periods.
The below table is based only on the largest net changes. For a more detailed view of levels of net position changes, see the specific sectors:
WN Positioning
WN is trading above 135, up sharply from ~130.2 this time last week, and now sits above all the buying and selling clusters seen over the past 12 months (Chart 1). The price is near the top of its YTD range.
The WN RSI jumped to 63.1 from 46.4. The current RSI level is now on the right-hand side of the 12-month distribution (Chart 2). The RSI has closed in the current bucket 17 times in the last year, after which price has tended (53% of the time) to rise in the week following. With this up move in the RSI, it means that the following week, at this RSI level, the indicator rose again 58% of the time.
US Positioning
US is trading at 126.06, up from 122.84 this time last week, having broken through big selling clusters between 123.5 and 125. At the current price, US trades above all the buying and selling clusters seen over the past 12 months. (Chart 3).
The current RSI, at 65.1, jumped from 49.1, and sits on the right-hand side of its 12-month distribution (Chart 4). The historic WoW performance from here is bullish — when you look at the current RSI range, prices rose 53% of the time the following week), and rose 55% of the time the following week if you look at the RSI level and the direction it is travelling in.
TY Positioning
At 114.45, up from 113.06 last week, TY trades above all of the buying and selling clusters seen over the last 12 months (Chart 5).
The RSI at 65.1, up from 52.4, is in the right-hand side of the 12-month distribution. It has closed in the current bucket 24 times in the last year and has fallen more in the week after 50% of the time. In the last year when the RSI has closed in this bucket and been moving downwards, the price has risen 53% of the time in the following week.
FV Positioning
Trading at 109.98, up from 108.88, FV trades above almost all the decent sized buying and selling levels from the past year (Chart 7). The price is near the top of its YTD range.
The RSI, at 69.1, rose sharply from the previous 54.2 reading, and is very near the overbought 70 threshold. Price moves have been skewed higher (rising 53% of the time WoW) over the past 12 months when closing in this range. When the RSI has moved higher as seen this week, the proportion of week ahead rises is also at 53%.
TU Positioning
At 103.84, up from 103.30 last week, the contract remains above all the buying and selling levels seen over the past year (Chart 9). The RSI sits on the right-hand side of the 12-month distribution.
The RSI at 71.9, above the overbought 70 threshold, has moved sharply higher from last week’s 57.4 level and is the highest reading of all the contracts we look at. The evidence over the last year suggests that when the RSI has been in this range and rising, the price has tended to rise 57% of the time in the week after.
Richard Jones writes about FX and rates markets for Macro Hive. He has traded and invested in interest rate and FX market portfolios spanning three decades, both on the buy-side and sell-side.
Henry Occleston is a strategist who focuses on European markets. Formerly, he worked in European credit and rates strategy at Mizuho Bank, and market strategy at Lloyds Bank.