Posted on by ColinTwiggs

Dollar rising, Treasury yields trend lower

The rally in ten-year Treasury Note yields continues. Expect resistance at 2.50% (the descending trendline). Respect would warn of another test of primary support at 2.00%. 13-Week Twiggs Momentum below zero continues to signal a primary down-trend.

10-Year Treasury Yields

* Target calculation: 2.30 – ( 2.60 – 2.30 ) = 2.00

A monthly chart of the Dollar Index places the current advance in its long-term context. Expect resistance at 88 to 90, with a possible correction to test support at 84. But the primary trend is up and breakout above 90 would offer a long-term target of 105. Rising 13-week Twiggs Momentum suggests a healthy (primary) up-trend. Failure of support at 84.50 is unlikely.

Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89.00

2 Replies to “Dollar rising, Treasury yields trend lower”

  1. Hello Colin/readers
    This is a bit disturbing!
    Future events pushing the USD (Index) back towards 120 would appear to be rather concerning (everyone except them in a hole?).
    The falling AUD v USD is just hanging a huge “For Sale” sign over Australia (property/assets) increasing future costs to our chidren (via a much increased base), and increasing their foreign debt obligations. Rising unemployment, economic slowdown (here and w/ trading partners) and falling commodity prices (and even less manufacturing) leaves us fairly exposed in the short/medium term. Increasing domestic interest rates will add to domestic burdens – if we can increase them. Terms of trade will be negative (or below avg) for some time with minimal increase in GDP/GNP and tax take to support Govt fiscal boosts (unlike 2005-09).
    If I was correct with my 1980’s comparison, it was 14+ years (post the Keating prime ministership) before we saw real recovery (and remember some of the pain before we got there) – albeit with a bear trap stock market 85-87; 89-91 and a scary property market 1991-1994 (18% mortgages). What price was gold then – I dont remember and did we care?
    From a long term perspective (because it wont happen in the short/medium term), do you have a view for Australia’s turn around – or the turning pts on the index chart above (how far back do you need to go?)? Or, is it not as bad as I see it (my looming cliff may just be a gully)?
    Thanks and I enjoy reading your posts and your opinions,
    Regards

    1. Hi Murray,

      A lot of the damage has already been done by the high AUD and will take many years to reverse.
      What we can do in the mean time:

      • Weaken the AUD without lowering interest rates. There are ways.
      • Spend big on (productive) infrastructure — even if it means increasing public debt.
      • Focus on restoring efficiency in the economy. The price of basic inputs like electricity, cement, gas, etc. have to be competitive if we are to survive. That alone is a Herculean task.

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