Are Those Double Tops In The Euro And Sterling?


US benchmark 10-year Treasury yields rose for the seventh consecutive week.  Such a streak was seen at the start of 2018 and late Q1/Q2 2009 and 2004, but none longer. The US dollar was mostly firmer, but its gains were concentrated against the Scandis and euro (FXE).  The Norwegian krone's roughly 1.4% decline against the dollar was the most among the majors, even though the central bank brought forward its first hike to Q4 this year and revised path, implies two hikes next year.  The Japanese yen (FXY) was the strongest of the major currencies, gaining about 0.2%, to end a four-week slide.  

What is striking about the rise in US yields last week is that they took place as oil prices tumbled.  May WTI fell by about 8.25%, the most since last October.  The breakdown in the co-movement is notable.  Other factors influence long-term US Treasury yields besides oil-driven inflation expectations.  We note that the significant fiscal stimulus means an endless supply of US Treasuries.  Next week the US will raise $200 bln outside of the bill market, and banks lose the exemption for the supplemental leverage ratio.

Shifting macro drivers and a relatively light economic calendar (outside of preliminary March PMI), technical considerations may play a more important role.  Let's turn our attention to the technical outlook now.  

Dollar Index:  The Dollar Index continues to bump against the 92.00-level.  It saw some shallow intra-day penetration, but it has closed above it only once since falling through it at the end of last November, and that was on March 8.  Even though momentum indicators remain at elevated levels, there is scope for marginal new highs in the Dollar Index.  It reached 92.50 on March 9, and we have been targeting 92.75, which is about where the 200-day moving average and upper Bollinger Band begin the new week.  The 92.30-92.50 area may offer initial support.  

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Read more by Marc on his site Marc to Market.

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