Treasury Futures Set to Drop to 5-Month Low: Technical Analysis

U.S. 10-year Treasury futures may decline to the lowest level in more than five months after failing to climb above key levels of so-called resistance, UBS AG said, citing trading patterns.

The 10-year contract may slip to 133 1/32, the 38 percent retracement of its rally to last month’s high on Sept. 28 from the Sept. 14 low, should it break below support at 133 11/32, Richard Adcock, head of fixed-income technical strategy at UBS in London, wrote in a note to client today, referring to so- called Fibonacci analysis. The support level represents the low from Sept. 27 and is a “short-term hold level,” Adcock wrote.

“It continues to look as if the upper limits of the current trading range are turning” 10-year securities lower, Adcock said. “The 131 23/32 September low, which is the lower extreme of the sideways range, is our target focus.”

The 10-year note contract expiring in December was little changed at 133 19/32 at 4:06 p.m. London time. It traded as high as 133 27/32 on Sept. 28, the most since Aug. 30, according to data compiled by Bloomberg. It last reached 131 23/32 on Sept. 14, the lowest level since April 26, the data showed.

Resistance refers to an area on a graph where analysts expect sell orders may be grouped. Support is an area where buy orders may be clustered. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a new high or low.

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

To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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