Yields on the Portuguese and Irish bonds relative to the benchmark German bonds narrowed from record highs of 372 bps and 377 bps, to 350 and 372 bps respectively, offering a short term reprieve in fear of default. EURUSD is rallying in response to slightly better than expected bond auctions, but restructuring appears to be in near future and the corrective wave structure in the hourly EURUSD confirms this outlook. A look at the S&P futures and EURUSD overlay supports this outlook as EURUSD is significantly lagging equity advances. I have significant resistance in the SP 500 60 Min Cashat 1110.
Bringing the yield focus back to the US, the advance from the 2.4% low in the 10 yr maturity is also taking the distinctive shape of a 3-wave corrective structure. Yields failed at the 2.72%-area Fib resistance zone, and have since backed off. While yields remain below this level, the demand for the safety of US treasuries should continue, which supports the USD rally.
As mentioned above, EURUSD is rallying in 3 corrective waves facing resistance at the 1.2770 level. I have adjusted the offers in EURUSD to 1.2770 and 1.2805 with stops at 1.2905 from yesterday's trade parameters. True the stops are wide, but know that it's unlikely I allow the market to go that far against us before cutting the potion. They are in place strictly to mitigate risk in the event of a complete market eruption, and will be quickly adjusted lower as the trade progresses
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