Last week's US30 rally is consequential in peak and trough analysis. The index rallied more than 3% for the week and significantly charted a higher peak (HP). This price action breaks the downtrend that has been in effect since February this year. However, an uptrend is yet to be confirmed. The index needs to chart a higher (HT?) followed by a higher peak (HP?) for that to happen.
The end of the US30 downtrend corresponds with the weekly chart moving into its bullish zone. This area is between the upper blue and red bands in the top chart (blue arrow). The second chart shows the real rate; below is the correlation coefficient between the US30 and the real rate.
Whilst not perfect, there has been a tendency for the index to be inversely correlated to the real rate (green rectangle). This relationship makes sense given the time value of money. However, the CPI moderation suggests real rates may loosen, and we watch to see if the index can build on this. Again, data is of paramount importance as more information regarding inflation is needed.
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.