30 Yr US Bonds upside breakout risks !

Timespan for strategy validity based on in-house model - 2 Months.
Key decision drivers - long term trendline support bounce , Weekly stat arb indicating upside breakout potential .

Daily close above 138.50 and a weekly close above 139.50 does the job. Overall the strategy can be fine tuned by looking out for long setups in 135.50 region and stops below 134 to target 138.50 at first and then larger targets like 141.50.

30 Yr bonds have been finding decent enough support in 135.00/50 zone for the last 2-3 months hence a stops below 134.00 is ideal and justifies the technical setup.

On a fundamental perspective my Dax Index model has shows signs of exhaustion along with few other equity indices like Dow, Bovespa, BSE which may imply a consolidatory to slightly corrective (lower) phase in equities sending bonds higher.

Overall my directional view on 30 yr bonds for the next 2 months is Bullish .

RV Trade Short ZAR against a basket of INR & MXN - Reform Trade

Last few quarters have been extraordinary for EMFX especially countries running the risk of higher current accounts(deficits), political risks.

Long MXNZAR @.8100 stop 0.7900 for 0.8500
Long INRZAR  @ 0.1755 stop 0.1710 for 0.1810 and 0.1900

I like to call this the reform trade. The expectations of investors from EM governments to push in new reforms has been higher than ever. Firstly it was Mexico with its oil reforms and recently expectations from Modi's Indian government. The recent  trend has been, the inflows to buy Indian equities and bonds with the 'expectation' of change and implementations of new reforms. A similar trend can be noticed in Indonesian equities with the expectations of new government and possible reforms. Later this year investors expectations from Brazil should reflect in Bovespa and BRL.

On a relative basis South Africa is severely lagging in terms of new reforms to kick start the economy or increase investor confidence. SARB is relatively dovish on its monetary stance as growth has fallen. The current account deficit remains a concern when compared to likes of Mexico or even India which has managed to reduce it remarkably.

There is a carry potential on Long INRZAR whereas a slightly negative carry on Long MXNZAR.

The chart above is INR/ZAR Monthlies and it is evident that the pair has found support on the long term support trend line at 0.1750 after consolidating for approximately 5 months and now heads higher to top of the range trend line resistance of 0.1920.  My in house models do agree with the setup which is a plus.

The chart below is MXNZAR monthlies. 0.8000 has been a multi year resistance line which has been tested aggressively in 2008-09' but failed to trade above. Last quarter of 2013 the pair finally closed above 0.8000 and since then has been finding support at 0.8000. I think there is potential for 0.8500 for this trade which is the topline resitance. Again my models do agree with the forecast. Overall there lies plenty of scope trading the big range 0.7500-0.8500 depending on the risk profile one has and how he perceives the incoming macro data.

EMFX Currency Charts- Risk lie to upside short term !

Cautious on EMFX short term possibly till end of July. If you are following my posts since May 2014 you will notice a  short bias in emerging market currencies especially INR (post election).

The following charts are long term however the daily formations and intra-day price action off this major trendlines should not be ignored! Also notable three day bank holiday coming in the US so I would expect the vols to kick in next week or so. Time to buckle up the seat belts..

 

Daily 10YR TRY Yields basing out at 8.50 support.