Comment: Eurodollar futures are trading roughly fifty basis points over Euribor ones, the widest since January 2009, while the spread between benchmark ten-year TNotes and JGBs at 150 basis points is the narrowest since then; probably another unintended consequence of a zero interest rate policy. Open interest in front Dec and March Eurodollar futures contracts remains high, probably reflecting year-end worries, as prices hover in the middle of ‘broadening top’ formations. Note that moving averages are no longer supportive of a long position. A weekly close below 99.520 might turn momentum decidedly bearish and one below 99.475 completes the pattern.
Strategy: Sell at 99.585; stop above 99.650. Add to shorts on a weekly close below 99.520 and again on a daily close below 99.470 for 99.375/99.315.
