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Will This Be the End of the USD Retreat As Bond Yields Reach the 100 SMA?

So far this week, the commodity dollars are adding to the USD woes. They have been showing resilience as the sentiment improves on the prospects of the FED and other central banks not raising rates anymore. Treasury yields have turned bearish which has been dragging the USD lower although the decline in yield rates yesterday didn’t pull the USD back as much as it should have, which is a positive sign for the Buck.

Today, there will also be a 7-year note auction to keep an eye out for. With that in mind, the biggest concern in the bond market right now is that 10-year rates are on the verge of testing their 100-day moving average (green) on the daily chart. This moving average held as support on the first test last week and we saw a decent jump higher off that moving average. But, the 20 SMA (gray) turned into resistance at the top, stopping the bullish momentum and yesterday the reversal down came,

These are significant technical developments for the Treasury yields and the USD, with the AUD/USD potentially seeking to reach and breach the summer highs, and the NZD/USD perhaps targeting the highs from earlier this year too. For the time being, there is still some distance to go before we see that, but if the bond market cooperates, the dollar might be vulnerable to an extended slide, and I can see the above levels coming into play.

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Month-end trading may make things a little more difficult in the next sessions, but the technicals will always be a helpful guide in reading overall trading sentiment and where we might be going next. For the time being, we will keep an eye on bonds because they will have an impact on both the dollar and risk sentiment.

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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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