US Rates Technical Report: TU Overbought, FV Very Close, Long-End Contracts Less So
- 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 moved higher, with RSI in TU above 70 showing an overbought reading, and FV at 68.6 coming close.
- The move higher in RSIs at the longer-end of the curve was less pronounced.
- The TY RSI moved to 61.1 from 56.9, the US to 54.8 from 52.4, and the WN to 52.6 from 51.6.
- Prices across the curve are higher, which is consistent with the moves seen in the RSIs.
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 strong buying and selling.
- The US price trades close to the biggest 6-month lookback net short level at 120.
- TY trades above all the net long and net short lookback periods.
- FV trades above all net long and net short lookback periods, with the exception of the 6-month net long lookback level, which is just above spot at 108.2.
- TU trades above the largest net long and net short lookback levels (clustered between 101.5 and 101.7).
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 52.6, up only very slightly from the previous reading of 51.6, WN moved closer to the overbought RSI level of 70. There is therefore no clear bias evident from this RSI reading.
Trading near 126.5, the price is trading within a decent cluster of 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 only marginally higher, to 54.8 from 52.4, which leads us to a similar conclusion — no clear bias is evident from this RSI reading.
Trading near 119.5, the contract is near the bottom end of a decent-sized selling cluster between ~119.5 and ~121.5, and a notable buying cluster at ~119.75.
TY Positioning
The TY contract, with an RSI reading of 61.1, followed a similar trend to the WN and US contracts, rising from the previous RSI reading of 56.9. This is in the definite upper-end of RSIs in the last 12 months for the contract, suggesting increased risk of retracement in the near-term.
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 (from 68.6 from 61.7). This is close to the highest it has been in the last 12 months, and suggestive of near-term retracement.
Trading near 107.5, FV has cleared the bulk of a decent cluster of selling between 106.3 and 107. Buying interest is less pronounced, and the contract sits at the top end of smaller clusters between 107 and 107.5, and just below another small cluster above 108.
TU Positioning
At 74.5 versus a previous reading of 65.2, TU RSI is at its highest rate in the last 12 months, strongly indicative of being overbought. The RSI also saw the sharpest move higher of all the contracts.
Currently trading above 102.50, the contract has cleared a massive selling level at 102, with further material selling 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.