Japanese Bond Futures' Rally May Stall on Resistance: Technical Analysis

A one-month rally in Japanese government bond futures may stall, capped by resistance formed by a five-day moving average, Mizuho Securities Co. said, citing trading patterns.

Ten-year bond futures for December delivery rose from 141.23 on Sept. 10 to 144.15 on Oct. 6, supported by the five- day average, according to Tetsuya Miura, chief market analyst at the unit of Japan’s second-largest banking group. The contracts have stayed below the average since Oct. 13 and declined to as low as 143.69 yesterday. The five-day line was at 143.85 yesterday.

“The five-day moving average will serve as a line of resistance in the near term,” Miura said. “The futures have entered range-bound trading at the 143 level.”

The 14-day relative strength index for the futures reached 73.60 on Oct. 6, the day after the Bank of Japan announced additional easing steps. Readings above 70 indicate an asset’s price is poised to reverse course. The index has remained below the 70 level since the following day, signaling the contracts are correcting from overbought conditions, Miura said.

The futures are being supported by the 25-day moving average, which was at 143.07 yesterday, and will likely stay between the five- and 25-day lines at the 143 yen level in the near term, Miura said. If the futures fall below 143, they may reach the mid-142 level, where the 13-week moving average is, he said.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

To contact the reporter on this story: Nobuyuki Akama in Tokyo at akam@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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