After the ECB last week, there was a strong bid in bonds although that has eased today with yields sitting higher. Some slight hawkish remarks by the ECB today here is helping slightly but overall, it seems like traders are waiting in the wings ahead of the Fed as there are some key levels approaching.

Let's take a look at 10-year Treasury yields first.

The Friday drop saw yields fall back below the 100-day moving average (red line) but the previous lows at 2.70% to 2.72% is still very much holding and that will be a key spot to watch in case we see an extension to the bond bid from the end of last week. It's all down to the Fed now and if there is reason for bonds to rally, a big drop in yields taking out the levels above will materially impact broader markets surely.

At the same time, 10-year German bund yields are also approaching a key level:

The drop on Friday took out the recent lows near 1.07% and saw yields fall to its lowest since the end of May. But more notably, it is approaching a test of the 100-day moving average (red line) again - a level which held in March. A drop back below the 1% mark and the key technical level should coincide with a broader bid in bonds and that may see markets react more strongly.

If we are to see a material drop in yields breaking the key levels as highlighted above, expect yen pairs to feel the gravitational force and be weighed lower as well. If this comes as a result of a Fed fail this week, expect that to drag the dollar down as well.