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Technical Analysis of US Bonds

Recently, I have been monitoring the US bonds chart more frequently. This article will tell you what I am looking for and why.

Let’s start with a bit of theory.

What does the bond chart actually tell us? There are certain general laws in economics. You have probably heard that stocks and indices are growing during times of economic prosperity while gold and silver are not. You might have also heard that precious metals grow in value and are frequently sought upon in times of crises as investors look for a so-called “safe haven”.

With bonds, it is a similar scenario. Especially with the ones owned by the state. There is a dogma about government bonds that it is one of the safest investments. Of course, you cannot expect the interest rates on these bonds not to be anything other than conservative.

So whenever there is an increased interest in government bonds from the side of investors, we can assume that they are looking for a safer investment option. Or they no longer trust the growth of shares and want to protect their assets. These are the very rudimental economy rules. So now, let's put theory aside and look at what the chart of 20-year US bonds looks like.

Chart

As for the chart, we can see that there is a kind of triangle on the weekly chart. Overcoming the trend line which acts as resistance will be key here. Ever since 15. 03. 2021 , the bonds are growing and are currently on the trend lines. If we look at the economy and individual stocks or indices, we already see several factors of “overheating”.

US bonds weekly chart Figure 1: US bonds weekly chart

This bond chart combined with the dollar index chart / DXY / could be the first to indicate to us that a turnaround may be approaching in the economy. The most important thing in this chart is the trend line. If the bonds can break through it, then it means that a lot of investors are just going to invest in something "safer" and it may mean that a correction is approaching traditional markets.

Conclusion

Bonds are just one of several indicators, but last week we addressed the growth of DXY, so if several such important factors come together, things could start to be dangerous.

Jakub is a crypto trader and founder of Trader 2.0 project, which helps hundreds of traders from central Europe to understand cryptocurrency trading and its challenges. Jakub not o...

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