FxWirePro Call Review: 10-year bund’s recovery likely to present selling opportunities ahead

In October 2016, we urged our readers to go short in 10-year bund, at the breakout of 162.5 with an initial target of 160 area and subsequent longer-term target of 153. The article is available here, http://www.econotimes.com/FxWirePro-10-year-bund-heads-for-a-sell-breakout-367667

In a subsequent article, we have reaffirmed our outlook and also shared our forecast that the spread between the 2-year bund and the 10-year bund would widen over time. That review is available here, http://www.econotimes.com/FxWirePro-Keep-riding-the-bund-short-call-review-397028 . In addition to that, In January 2017, we had called on our readers to go short in 10-year bund and long the German benchmark stock index around 11560.

In our review on 28th February, we warned our readers that our short call in bund is under threat due to election uncertainties in Europe and warned that it might break the stop loss around 168 if the Dutch election turns out in the favor right-wing candidate Geert Wilders. However, that has not happened and thankfully we maintained the stop loss. The 10-year bund reversed course after reaching as high as 166.3

In several subsequent reviews, we reiterated our commitment to the short side of bund though the movement has been much slower than we originally anticipated. That is not surprising, given the fact that the European Central Bank (ECB) has taken up a very gradual approach when it came to winding monetary policies. We even urged our readers to add short positions in bund, when it was retesting the resistance line, here, https://www.econotimes.com/FxWirePro-Call-review-Add-short-positions-in-10-year-bund-1067353

The 10-year bund is currently trading at 159.4 and we maintain our short side outlook. Here is the list of targets (both reached and yet to be reached).

Reached targets – 160, 159, 158, 157.3

Pending targets – 155,153, 151.3, 145

In this article, we would like to reaffirm our bearish outlook and urge our readers to keep a close watch as the rising bund would present a selling opportunity going ahead. Our current calculations suggest that the 10-year bund could rise to as high as 162.1, though it won’t meeting the upper resistance line until 162.8 area.

We would recommend adding short positions once it nears 162 area. The ongoing selloff in equities, lower commodity prices, and a dovish ECB are pushing the bund higher.