US Rates Technical Report: RSIs Slip Slightly, Week-Ahead Prognosis Mixed
- By Richard Jones and Henry Occleston
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Summary
- Prices across the curve were lower (ex-TU), with all corresponding RSIs lower over this past week.
- Given the price action, the across-the-curve drop in (and current level of) RSIs means the week ahead prognosis is mixed, which is especially challenging in a week which will see the US jobs report almost surely provide elevated volatility.
- Should the RSI dynamics (outright levels and lower readings) of the last 12 months persist, stats suggest that WN and US prices are more likely to fall, with TY and FV prices likely to rise.
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 (133.41): both RSI and price fell last week, although current price remains above all the biggest net long and net short levels seen over the 3-month, 6-month and 12-month lookback periods. At 48.1, the RSI alone gives little indication of WN’s next move, but the price has tended to fall when RSI is at this level and declining.
- US (124.41): both the US RSI and price fell this past week, with the RSI sitting in the middle of the distribution at 47.1. This does not give a strong indication of US’s next price move, but the price has tended to fall when RSI is at this level and declining. US price sits below the biggest net short levels on a 3- and 6-month lookback, and below the biggest net long level on a 3-month lookback, and above all other lookback period levels.
- TY (114.41): both the TY RSI and price fell this week. The current RSI level does not give a strong indication of future price move but at this level after falling from the previous week, TY price has tended to strongly rise. TY price is above each of the long and short lookback levels.
- FV (109.96): Both the FV price and RSI are lower this week. At this level, after an RSI fall, prices have tended to rise the following week. Additionally, the current price is above the biggest net long and net short levels across the last 12 months.
- TU (104.14): Even though the TU price edged slightly higher, the RSI (at 65.1) pulled back from the previous overbought level of 71.6 and remains below recent highs. When the RSI is at this level and declining, the last year’s experience suggests weaker prices should follow.
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 at 133.41, down from 133.59 this time last week, and now sits below a decent-sized selling cluster at 133.75 (Chart 1).
WN RSI pulled back very slightly to 48.1 from 48.5. The current RSI level remains in the middle of the 12-month distribution (Chart 2). The RSI has closed in the current bucket 62 times in the last year, after which price direction has been mixed. With a down move in RSI at these levels, however, the price tends to fall the following week.
US Positioning
US is trading at 124.41, down from 124.66 this time last week. At the current price, US trades between two selling clusters at 124 and 125, and below a more modest buying cluster at 124.75 (Chart 3).
The current RSI, at 47.1, down from 48.2, sits in the middle of its 12-month distribution (Chart 4). The historic WoW performance is relatively clear – considering just the current RSI range, prices fell 54% of the time the following week and fell 65% of the time if you consider the RSI is falling.
TY Positioning
At 114.41, down from 114.61 last week, TY trades between a decent-sized selling cluster at 114.9, and a smaller one at 114.5 (Chart 5).
The RSI at 52.7, down from 57.3, is slightly to the right-hand side of the 12-month distribution. TY has tended to rise much more (78% of the time) when the RSI has closed in this bucket and been moving downwards.
FV Positioning
Trading at 109.96, down slightly from 110.00, FV trades near a very small buying cluster at 109.90 (Chart 7).
The RSI, at 56.7, fell from the previous 61.5 reading. Subsequent week price moves have been mixed; falling 54% of the time over the past 12 months when closing in this range. However, when the RSI has been in this range and moved lower as seen this week, the proportion of week ahead rises is at 82%.
TU Positioning
At 104.14, up from 104.09, the contract is near a modest selling cluster at 104.10. (Chart 9). The RSI sits on the right-hand side of the 12-month distribution.
The RSI (at 65.1) has pulled back from the previously ‘overbought’ level at 71.6. The week-ahead prognosis is mixed — prices rose 56% of the time over the past 12 months when closing in this range. When the RSI has been in this range and moved lower as seen this week, the proportion of week ahead price drops is at 70%.
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.