Bloomberg News

Japan’s Bond Futures May Fall to 2-Week Low: Technical Analysis

April 24, 2012

Japan’s government bond futures may decline toward a two-week low, SMBC Nikko Securities Inc. said, citing trading patterns.

Futures for June delivery yesterday rose to 143.04, the highest level for a lead contract on an intraday basis since Feb. 14, when the Bank of Japan (8301) unexpectedly eased monetary policy. The contract’s relative strength index signals that gains have been too rapid, according to Makoto Noji, a Tokyo- based senior debt and currency strategist at the unit of Japan’s third-largest publicly traded bank by assets.

The RSI for the bond futures touched 68.5 on April 23, the most since August. It was 62.4 at the close of trading in Tokyo yesterday. Readings above 70 suggest the contract is overbought.

“With its RSI approaching 70, the contract may be poised for a downward correction,” Noji said.

Bond futures may decline toward their 50-day and 100-day moving averages at about 142.30, the lowest level since April 10, Noji said. The 50-day and 100-day averages were at 142.29 and 142.33 yesterday respectively. Futures were little changed at 142.77 as of 9:35 a.m. at the Tokyo Stock Exchange.

In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.

To contact the reporter on this story: Yumi Ikeda in Tokyo at yikeda4@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at Rswift5@bloomberg.net.


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