The US 10-year yield is trading near 4.25%, at levels last seen at the end of 2022. The underlying driver is a strong US economy and the sense that the Fed will leave rates "higher for longer." The strong US-10 year is having an impact on the spread between the US and Canadian 10-year bonds.
The spread is growing in favour of US bonds. We can see that its green 5-week EMA has bullishly crossed above its orange 10-week EMA (black ellipse). Moreover, the weekly RSI has popped above 50 (blue rectangle), suggesting an underlying momentum is supporting this expansion in the spread.
In response, the USDCAD forex pair has also moved bullishly. Its green 5-week EMA has also crossed above its orange 10-week EMA (red ellipse). This is not surprising as there is a positive correlation coefficient between the bond spread and USDCAD, currently at 64%.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.