These are the securities directly issued by the US Government which have the longest maturity (30years). The contracts are not quoted with decimals but with fractions. For instance, the prices soared during 2 months last year (November and December 2008, between points A and B on the chart) from 112 20/32 to 141 28/32.
As you know, bond prices move on the opposite direction of interest rates. In the real economy, there are of course other factors such as relative risk, expectations on degree of confidence that impact bond prices. But the surge in November and December last year corresponds to the time where the Fed smashed the interest rates to attempt boosting the economy.
In just 2 months, bond prices rose by 26%, an unusual volatility for those contracts. However they have corrected back to the initial point of this surge (point C). This new low just below 112 posted in June has created a “double bottom” pattern that is considered as a strong support zone. That’s why a new rebound was generated from point C. Currently the bonds are traded around above 119. This medium-term bullish trend is backed by an ascending support line that goes through higher lows posted during the last three months. This is the immediate support.
On the upside, the objective is the level of 123 16/32, which is “only” less than 4% higher than the current levels. This potential resistance (blue horizontal line) is a key support that has been successfully a high and a low level. It corresponds firstly to a peak posted one year ago in September 2008 (point D), then a new low (point E in late February 2009). It became a new high once again (point F) while prices were correcting strongly a few months ago.
Many indicators have recently turned bearish. Therefore a test of the current support is likely to last more. If this level holds, then a quick spike to 123 16/32 is probable. If it is cleared, the intermediary support around 115 would become the new target for the bears.
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and the USD swaps with foreign reserves and buybacks from primary dealers didn’t play any part?