Friday May 18, 2018 - 15:19:25 GMT
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Dollar Breaks Higher Through a Major Psychological Turning Point
John M. Bland, MBA, co-founder, Global-View.com
Establishing Above 3.00% In The Ten-Year Note Yield Has Been A Critical Achievement For the better part of the current year, forex traders have been focused on the psychological 3.00% yield in the U.S. 10-year Note. More precisely, 3.03% has been the major target for technical traders and others. Once broken, 3.030% was broken in the latest week that yield spiked higher to above 3.10%. With this goal having been achieved, I expect the focus of forex traders Focus now to shift more to the DIRECTION of yields rather than a specific level, now that there are no more major precise yield levels left in sight at the moment.
Rising Bond Yields An Expected Outcome Of The Federal Reserve Monetary Policy “Normalization” Process” This move higher in yields should be treated as a natural consequence of the rate “normalization” process. This is a case where the market appears to be leading the Fed on policy. I don’t think this level of rates will be causing any consternation at the U.S, central bank. They will not worry that a 10-yr yield in excess of 3.00% should be seen as an onerous development for the economy. In fact, the markets have already fully priced in (100% odds) a 25 bp hike in the Fed Funds target range from the current 1.50%-1.75% to 1.75% to 2.00%. As for forex trading, I feel that market participants will continue to feel free to continue to use the 10-yr yield for "instant analysis" following the announcement key upcoming U.S. data. In this regard, the opinion of the bond market traditionally has determined the price reaction of the various financial markets to these reports.
EURUSD Turns Lower The lead EURUSD relationship has turned lower over the past month. It had been trading in a rough 1.1250 to 1.2550 range from th start of the year until mid-April when weaker German economic data (lagged Winter reports) started to weigh on the pair. Below 1.2150, the EURUSD turned much weaker as U.S. interest rates began to climb. Odds are the pair will work its way into a new trading range. In my opinion, the new range could be 1.15-1.25, or 1.15-1.20 or perhaps something like 1.17-1.22. the key word in my outlook is “range”. From a practical stand point, the best you can do is take the market on its own terms and take it one day at a time. Let the current volatility work its way through the system, until a consistent storyline develops. Don’t try to be a hero here.
GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium
Mon 21 May 2018
AA EZ/CH/CA- Holiday
Wed 23 May 2018
AA 08:30 GB- CPI
A 14:30 US- EIA Crude
Thu 24 May 2018
AA 08:30 GB- Retail Sales
A 12:30 US- Weekly Jobless
A 14:00 US- Existing Homes Sales
Fri 25 May 2018
AA 08:30 GB- GDP
A 12:30 US- Durable Goods
A 14:00 US- Final University of Michigan
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