The US 10-year real yield remains elevated at the start of the week. This is putting pressure on the risk market and supporting the dollar as the current preferred haven. The question is how much higher can yields run?
The real yield's RSI has pushed back into overbought territory (green rectangle). This suggests that there is the possibility of a near term ceiling for real yields. This, in turn, may lead to a pullback or consolidation whilst the indicator normalises.
USDOLLAR and NAS100
A consolidation in the real yield may filter through to a greenback consolidation at current levels and perhaps a bounce on the risk side of the market. However, we need to see more evidence here.
Currently, the USDOLLAR is positioned in its bullish channel and the NAS100 in its bearish channel. Moreover, the USDOLLAR's stochastic remains above 80 (green rectangle) and the NAS100's around the 20 level (red rectangle). These readings are consistent with USDOLLAR strength and NAS100 weakness and will need to see some release if the situation is to change.
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.