Tuesday Interest Rates & the US Dollar
Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged. | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |
Not much is working in this market right now if you are long as the remaining areas of strength are being pulled lower. One area of strength over the last few days is the US Dollar. This strength is likely the result of unwinding global carry trades, diminishing prospects for the high-yielding currencies tied to the commodities and a flight to safety.
The chart pattern shows a very nice looking W bottom with a break above short-term resistance. Of course, there is plenty more resistance overhead so the dollar still has lots to prove. In the short run, this obviously works against commodities, materials, energy, etc. A couple tests of the sustaining strength in the dollar will be how it handles the test of the downtrend resistance and whether the RSI can move into overbought territory.
The broader view of the dollar shown in the weekly supports the initial signs of strength shown in the daily. The dollar is at long-term support and the RSI shows a nice positive divergence in which the RSI has found support above the oversold level. Of course, the fate of the US Dollar is mostly in the hands of the Fed and the central banks, and how they set rates.
When equity markets started selling off the funds initially flowed into 10Y notes. Then last week the fund flow dramatically switched to the short-term durations such as T-Bills. As a result, since the market sell off began there has been a shift lower in all rates. Over time, the lower rates are helpful to the economy and favorable towards stocks, but in the short-term it is a warning of economic stress.
