It's an interesting time for bond markets where the recent momentum is in between definitions.  The more pessimistic definition would consider January's impressive rally to be a healthy correction against a longer-term move higher in rates (this is reflected in the chart below).  The more optimistic outlook is that January's rally was more than just a correction in a larger trend, and may even be indicative of a supportive ceiling bounce.

Only time will tell which of these outlooks is more accurate, but this Friday's Employment data may well have be the biggest deciding factor in that regard in the near term.  There are a few reasons for this based both on trading levels and on the data series itself.

In terms of the data, last month's numbers were awful (the 74k on January 10th).  While one month of weakness wasn't enough to change the Fed's course of action (and even 2 might not be), it certainly played into weakness in equities and made the environment safer for bond markets to correct after a rough end to 2013. 

In terms of trading levels, and using 10yr yields as the representative for interest rate movement (MBS are following), we're getting to be within striking distance of important resistance levels in the 2.5's.  After all, last week ended at 2.65, so we're not far away--especially on an NFP week.  That said, neither are we far away from 2.80, or thereabouts, which is the midpoint of a long term trendline going back to 2009 (see in the chart below).

Now, it could be that this trendline simply serves as central tendency for an ongoing, but very slow, uptrend.  It also has the potential to act as technical support if we lose ground and then bounce, or as resistance if we break above and can't get back below.  Depending on how Friday's numbers tumble, we could see the first phase of either of those outcomes this week.