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Technical analysis: Short Sterling

This report has been deactivated

Short Sterling – March 2009

Wed, Feb 25 2009, 09:46 GMT
by Nicole Elliott

Mizuho Corporate Bank  |  View company's profile


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Comment: Three weeks to delivery and open interest in this contract is still almost double June09’s, almost a quarter of the total, underlining the fact that nobody really knows where term Libor should trade. The Gilt curve should flatten, admittedly from extremely steep levels, as long-dated yields move towards their German and US counterparts. The gyrations of Index Linked yields are truly terrifying and talk of deflation must be misplaced because yields have dropped from 2.50/3.00% in December to under 1.00% today. In fact many people seem to be having trouble with Treasury Note yields under 1.00%, hinting that two-year paper has run its course. We disagree and point to Swedish ones at 0.97% and Japanese ones, of course, which have traded under 1.00% for the best part of eight years. Short Sterling futures contracts are likely to trade broadly sideways for another few weeks, snaking their way inside very wide Ichimoku ‘clouds’.

Strategy: Possibly attempt small longs at 98.140; stop/possibly reverse below 98.000 for 97.850. Cover between 98.280 and 98.360.


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