Benchmark Real Yield
A key driver of the financial markets is the higher real benchmark yield. It has typically been putting pressure on the risk markets and supporting the dollar as a haven over the third quarter. Of late, the real yield has been increasing at pace reaching a high of 2.3%, and we suggested previously that it had become overbought on a daily basis (green rectangle).
The real rate has now pulled back over the last two trading sessions as its RSI normalises. This has had flow on effects to the dollar.
USDOLLAR Daily Analysis
Like the real benchmark yield, FXCM's USDOLLAR basket was also overbought on a daily basis (green rectangle). As the real yield eased over the last two days, the USDOLLAR also pulled back. The basket remains in its bullish channel between the upper blue and red bands.
The question is if this pullback in the real yield is temporary in nature and how high can real yields go? I.e., the pullback may be a dip in the larger uptrend.
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.