The top chart shows the weekly US10 Yr. treasury. We have added moving averages as a measuring mechanism for yield appreciation. The green ellipse indicates that the quicker green moving average is near to crossing above the slower orange moving average. If this happens, and angle and separation develop, the odds favour further appreciation in the rate. The blue dashed vertical marks the time of the previous bullish cross (aqua ellipse), on 20 September 2021. Since then, the FXCM USDOLLAR basket has been moving upwards (second candle chart). Below that is the correlation coefficient between the US10Y yield and the USDOLLAR instrument. Since the blue dashed vertical, the correlation between the two has moved from negative to positive (blue rectangle). This suggests that market participants see yield appreciation as a potential determinant for the greenback. This is sensical given that fixed-income investors will buy US treasuries in dollars, and a rising yield will be attractive to income investors. The current correlation is at 0.23. However, if the treasury's moving averages cross, and the correlation moves towards 1 as we move into Q1 of the new year, the USDOLLAR will likely be bid into 2022 as well.
Past Performance: Past Performance is not an indicator of future results.
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.