Bund Futures May Rally to 6-Week High: Technical Analysis

Sept. 4 (Bloomberg) -- German 10-year bund futures may rally more than 2 percent to a six-week high should they close above a key level of so-called resistance, UBS AG said, citing trading patterns.

The contract expiring in September may climb to 146.26, the July 23 high, should it close above 144.17, the 62 percent retracement of the sell-off in July and August, Richard Adcock, head of fixed-income technical strategy at UBS in London, wrote today in a note to clients, referring to Fibonacci analysis.

“If 144.17 is broken on a closing basis it would suggest a more prolonged rally is on the cards,” Adcock wrote in an e-mailed response to questions. Investors should sell the contract should the price reach 146.20, he said.

The bund futures contract expiring in September dropped 0.1 percent to 143.47 at 2:44 p.m. London time, after falling as low as 143.02.

A break below support at 143, the 38 percent retracement of the August recovery, would suggest this move has further downside potential, with the next area of support at the 62 percent level of 142.15, Adcock said.

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

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

To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net

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