Aug 31 (Reuters) - U.S. 10-year Treasury yields, an important interest rate benchmark for the U.S. economy, have shown no signs of reversing lower following their breakout higher earlier this summer and they are now approaching a key level that technical analysis indicates could increase expectations for a further move upward.
On Friday afternoon, they were trading around 4.73%, according to data supplied by LSEG, after Fed Chair Kevin Warsh came closer than previously to acknowledging that interest rate hikes may be needed to ease price pressures.
That level is not far from 4.7478%, which is the top of the recent range in 10-year yields, and a move above there would further strengthen the bullish case for this yield after it broke out of what technical analysts call a symmetrical triangle this summer. That chart pattern forms when a market's swings narrow over time, squeezing prices into an increasingly tight range before a breakout in one direction or the other.
The next level to watch would be the January 2025 high of 4.809%. After that is the October 2023 peak at 5.021%, and its significance is reinforced by the fact that the upper yearly Bollinger Band sits nearby. Bollinger Bands are a moving-average-based system used to assess volatility and whether a market is overbought or oversold.
For longer-term context, the January 2007 high stands at 5.333%.
On the downside, the top of the old triangle near 4.53% on the weekly chart, together with the rising 20-week moving average around 4.52%, marks an important support zone.
Technical analysts use moving averages to smooth out price data to gain a better understanding of overall trends. The 20-week average contained pullbacks in both April and late June, making it a key potential stopping area. A weekly close below that zone would begin to undermine the breakout narrative.
Further out, the 20-month moving average, currently just above 4.30%, remains an important longer-term pivot level.
What the chart shows:
Yields broke out of a symmetrical triangle earlier this summer
Next upside targets are 4.809% and 5.021%
Key support sits near 4.52%-4.53%, with 4.30% as a longer-term pivot
(Mapping the Market is a daily column written by Reuters journalists. The commentary is based on a technical analysis of financial charts, which helps assess the likelihood of future price moves but does not guarantee the outcome. The column does not constitute investment advice or trading recommendations.)
Terence Gabriel is a Reuters market analyst. The views expressed are his own. Editing by Burton Frierson and Matthew Lewis
