Short Term Trading Member Forum

[techcharter]

The Yield and Dollar

The markets have signalled a dollar rally by breaking the upper trendline from June '09 to December '09. The next test is the 200 day moving average.

http://stockcharts.com/h-sc/ui?s=$USD&p=D&yr=1&mn=4&dy=0&id=p96619673669

The yield on 10 yr Treasuries are range bound. Let's see if a different view reveals a stringer signal. Take the $tnx to $usd ratio:

http://stockcharts.com/h-sc/ui?s=$TNX:$USD&p=D&yr=3&mn=0&dy=0&id=p38151300267

As you can see, there is a textbook triangle from June '09 to December '09. This clearly signals a rally in the yield relative to the dollar. Since the dollar is going UP, then the yield will go UP proportionately faster. This will be a strong move because the consolidation has taken a long time.

Oh, bbbut doesn't a rising yield mean fear of inflation or default? NO! Dollar UP- Yield UP means deleveraging is taking place. It won't be long before the equities markets join in the deleveraging borrowers are engaging to pay off debt.