Following weaker-than-expected private job data and services PMI, US 10-year yield dropped to its lowest level in seven months overnight. Despite these signs of a potential cooling in the economy, which could prompt the Fed to ease up on tightening measures, major stock indexes closed mixed, suggesting that investors may be more concerned about a sharper slowdown on the horizon.
Technically, 10-year yield is approaching a critical support level at 55 week EMA (now at 3.237). A rebound around the EMA, followed by a break of 3.61 resistance, would initially signal a short-term bottoming. More importantly, this would argue that price fluctuations from 4.333 are merely a medium-term corrective pattern.
However, firm break of the 55 week EMA could indicate that 10-year yield is already correcting the whole uptrend that began at 0.398 (2020 low). In this scenario, a deeper decline through the 3% handle to 38.2% retracement of 0.398 to 4.333 at 2.829 could occur before finding sufficient support for a sustainable bounce.
