The real rate (top candlestick chart) has declined since Friday, 22 Oct. This yield has a causal relationship with the greenback, and, as such, FXCM's USDOLLAR basket has followed it downwards. The H4 correlation coefficient between the two is a strong 78%. I.e. any further pressure on the real yield will likely ripple through to the dollar.
The real rate remains overbought on the longer-term weekly chart (green rectangle). This condition will not be able to hold indefinitely, and normalisation is needed. The current correction on the H4 chart may be a part of this process. If so, it will continue until the weekly RSI reverts to typical levels. I.e. the USDOLLAR is still susceptible to further weakness until the real yield has shed its excess and technically corrected.
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.