The rally in bonds from late April to mid May was stemmed by a test of its 200-day moving average (green line) at the time. The low in yields then was around 4.31% and we are seeing yields hold thereabouts again now. The drop since last week sees yields move down, to now test the 100-day moving average (purple line) at 4.33%.
Essentially, the confluence of the key daily moving averages at 4.33% to 4.35% alongside the May low of 4.31% is the key technical juncture for the bond market currently.
Hold above that region and bond sellers will stay in the game. But break below it, and bond buyers will have more impetus to drive yields lower again as part of the next leg.
It is shaping up to be a rather important test for bonds and for broader markets. It all now rests on what the US labour market has to say in the days ahead. The first hurdle will be the ADP employment roulette data coming up later today. As much as the report isn't a good indication of what to expect for Friday's non-farm payrolls, it is still one that market players might use as an excuse to make their move.
