Forex Signals Brief for Mar 22: Treasuries on Watch
US Wrap
US equity markets were relatively flat to close out the week along with the Greenback.
We had been seeing some volatility, but Friday certainly did not deliver on that front.
Interestingly, the VIX did push higher and is back above the 20.000 level and it will be one to watch as the week rolls on.
The Data Agenda
My main focus at the moment continues to be treasury yields and what that is indicating for the economy.
The thesis that I am focused on is a little different to what I am reading elsewhere. The current narrative is that rising yields mean inflation is on the way and potentially rising interest rates.
This of course comes at a time when we will be hearing from Jerome Powell and Janet Yellen as they testify in front of congress. Powell spoke last week that he expects rates to remain on hold for now.
What is important to understand is that rising yields actually means that bonds are falling. Bonds have been propped up for a long time simply by QE and central banks buying. This can only last for so long.
What we’re seeing in bonds is nothing more than selling pressure. Is that forced selling? Perhaps. If the tap stops, then there’s no one left to buy.
Could a bond market meltdown, be the catalyst for another correction in stocks? Something to consider.
Forex Signal Update
The FX Leaders Team hit 6 winners from 12 trades last week for a 50% strike rate where we saw some volatility in the USD.
We have three open signals so look to the forex signals page for all the latest developments.
US 10-Year – Watching
The bond yields fell away across the board on Friday. Keep watching this week with Powell and Yellen in focus. Has all confidence in central banks been lost?
EUR/GBP – Watching
The EUR/GBP is testing this big support level. We’re short hoping for a break.
Cryptocurrency Update
BTC is red to start the week and is under the $58,000 level.
I remain bearish, but will not be ruling out another test of the $60,000 level.
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