A robust economy is driving real yields higher, supporting FXCM’s USDOLLAR basket


Source: www.tradingview.com

The US 10-year real rate is a key driver of FXCM's USDOLLAR. The two instruments have a robust positive correlation coefficient of 79%, with the USDOLLAR generally tracking the real rate.

The higher real rate has resulted from bonds selling off due to a resilient economy. Investors have positioned for interest rates to remain elevated even after the Fed ends its hiking cycle i.e., higher for longer.

The Atlanta Federal Reserve's GDPNow forecasting model estimates real GDP in Q3 at 5.6% as of 1 September. Moreover, whilst the labour market has softened, the current unemployment rate is still low at 3.8%, and is still considered tight.

Source: www.tradingview.com

Why Trade with FXCM

Commission free with fast, efficient execution.

Given the positive correlation between the real yield and the USDOLLAR, it is interesting to note that the US 10-year real yield is bullish. Its green 5-day EMA has bullishly crossed above its orange 10-year yield (red circle). Moreover, its RSI is on the bullish side of 50 (blue rectangle). If this position is maintained, the underlying momentum will be biased towards even higher real yields. This, in turn, will likely provide further support for the FXCM USDOLLAR basket.

Russell Shor

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.

${getInstrumentData.name} / ${getInstrumentData.ticker} /

Exchange: ${getInstrumentData.exchange}

${getInstrumentData.bid} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.