As yields move lower today helped by Geopolitical developments we are once again gravitating towards one of the most important technical levels in Financial Markets at the moment (in my view)
As we have seen Geopolitical developments (with the recent exception of the Russian invasion of Ukraine) have had limited lasting effect past the headline. However, we are now in a place that is pivotal as we look in particular to the FOMC and to employment data this week
The US 2-year yield remains "poised" above the pivotal 76.4% level at 4.335% (Low so far 4.338%).
76.4% retracement levels this year have been big both in terms of when they hold and when they break and with both the FOMC and Employment this week (as well as other decent data) I suspect this level will be no exception.
My bias remains that it will give way and open up for a move towards 4.1% and the traditional 140 bp's spread to Fed Funds ahead of the first cut in the cycle so that will be important to watch.
Historically when that has happened it has ended up being an aggressive cutting cycle as the fed (once more) gets caught behind the curve
