After posting a closing price reversal top on July 5, the September 30-Year Treasury Bonds plunged sharply lower following the release of a better-than-expected U.S. jobs report. The U.S. Labor Department reported 195,000 jobs were added in June, this soundly beat pre-report estimates of 165,000. The unemployment rate remained at 7.6%.
Although the number of jobs added was below the pace the Fed had been expecting when it began its stimulus program, the pace remained steady enough to say the economy was still recovering. This has led to speculation the Fed will soon begin tapering its monthly monetary stimulus program. The size of the downdraft indicates that traders hit the short side with clarity and conviction.
Following the closing price reversal top at 136’27, the market confirmed the potentially bearish chart pattern when it took out 135’09. This led to an almost immediate breakout under the last main bottom at 133’04.
Now that the T-Bonds have taken out support on the daily chart, the focus should shift to weekly and monthly downside targets. The next downside target according to the weekly and monthly charts is a 50% level at 129’02. Traders should watch for a technical bounce on the first test of this level because chances are it will be oversold on the daily chart if it reaches this level over the near-term.
Although the jobs data has set the tone for a bearish month, trend traders should watch for periodic retracements for fresh shorting opportunities.