US Rates Technical Report: RSIs Bounce Higher, Led by Short-End
- By Richard Jones and Henry Occleston
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Summary
- We examine changes in positioning for US rate futures to identify support or resistance levels.
- The RSI readings on all contracts rebounded, moving closer to the overbought 70 level, after having fallen closer to oversold the week before.
- This week, TU is the closest to being overbought, with the RSI reading at 65.2.
- In general, the shorter end of the curve (TU and FV) is more overbought than the longer end.
Using Positioning Data to Find Key Futures Levels
We look at net positioning moves in our Cross-Market Positioning Report. Here, however, we use an alternative model for analysing CFTC futures data based on the key levels at which net positioning in fast money has changed. Our aim is to identify support and resistance levels.
Ahead, we will build this analysis into a short-term technical indicator.
The current analysis suggests (Table 1):
- The WN price, across all three lookback periods, is well above levels associated with both buying and selling.
- The US price trades above the biggest net long level (115.5) for all three lookback periods, below the 6- and 12-month net short lookback levels (125), yet above the 3-month net short lookback (116.3).
- TY trades above all the net long and net short lookback periods with the former at 108.3 and the latter at 108.8.
- FV net long and net short lookback periods are all clustered between 105.1 and 105.4, with the exception being the 6-month net long lookback level, which is at 108.2. FV trades above all these lookback levels.
- TU net long and net short lookback levels are similarly clustered between 101.5 and 101.7, with the price (102.27) above these levels.
Importantly, 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
With the RSI at 51.6, up from the previous reading of 41.4, WN moved closer to being overbought. Although no clear bias is evident from this RSI reading, the sharp move higher in such a short space of time is worth monitoring in the coming days and weeks.
Trading near 126, the price is approaching a decent cluster of historic buying interest between 126.25 and 126.75. It now trades above the biggest selling interest near 122.25 and above another decent cluster between 124 and 125. Additional selling levels are seen nearer 132, with not many material clusters of previous buying interest above that 126.25/126.75 zone.
US Positioning
As with the WN contract, the RSI reading for the US contract is up sharply, from 41.6 to 52.4, which does not give a clear bias, but the sharp move higher in such a short space of time is worth monitoring.
Trading just below 119, the contract is approaching a decent-sized selling cluster between ~119.5 and ~121.5, and a notable buying cluster at ~119.75.
TY Positioning
The TY contract RSI rose to 56.9, from 45.7 previously. Again, no clear signal can be taken from this but, as with WN and US, the sharp move higher in such a short space of time is worth monitoring in the coming days and weeks.
Trading near 110.5, TY trades just below a decent buying level near 111. Above that, there was material buying seen at 111.8, with selling interest seen at 111.3, and above between 112 and 113.
FV Positioning
The RSI reading in the FV contract moved higher (to 61.7 from 51.5) but, even above 60, it does not yet provide a clear signal.
Trading near 107, FV has cleared the bulk of a decent cluster of selling between 106.3 and 107. Buying interest is less pronounced, but there are smaller clusters between 107 and 107.5 and above 108.
TU Positioning
At 65.2 versus a previous reading of 58.7, the RSI pattern in the TU contract has moved furthest towards overbought territory.
Currently trading above 102, the contract has cleared a large area of historic selling at 102. Further material selling was seen in the past between 101.5 and 101.75. There are only small clusters of buying and selling interest above 102, with buying interest ever-so-slightly more prevalent than selling.
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.