French bond spread may widen
19 Mar 2017 - 23:08
Investors are fading the narrowing spread between the yields on France and Germany, which may spur an attempt to test retracement levels from the narrowing trend seen since the last week of February, chart patterns suggest.
News that Dutch citizens rejected the anti-Islam Freedom Party would find an echo among French voters emboldened bulls to send the spread lower on March 16. However, the spread bounced back from support at 59 basis points to about 66 basis points a day later. With that support having held, bears may have their sights set on Fibonacci retracement levels of the trading range from February. 20 to March 3.
Support at 59bps comprises the lower end of the ichimoku cloud and the November 28 spread high, which was also the point of breakout
Focus may turn to resistance at 71bps, 74bps and 78bps, all of which are retracement levels
Daily chart momentum has nudged back to neutral, allowing for a sustained phase of widening in the coming days