Category: US Dollar Index

Flight to safety is driving demand for the Dollar, with the Dollar Index breaking resistance at 90 to signal a long-term up-trend.

Long-term Treasury yields are falling in response to a lower inflation outlook. But foreign Treasury purchases may also be a contributing factor, with China seeking to protect its advantage in export markets.

Expect strong support at 1.40 to 1.50 percent. Yields are unlikely to fall below that level unless there is a serious risk of deflation. Recovery above 3.0 percent appears some way off, but would warn that the 30-year secular bull market in bonds is coming to an end.

The yield on ten-year Treasury Notes recovered above the former support level at 2.30%, suggesting another test of 2.50% and the descending trendline. Reversal below 2.30%, however, would warn of another test of primary support at 2.00%. 13-Week Twiggs Momentum below zero continues to signal a primary down-trend.

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

The Dollar Index respected its new support level at 84.50 and recovery above 86.5 would confirm a primary advance to 89*. Rising 13-week Twiggs Momentum suggests a healthy (primary) up-trend. Failure of support at 84.50 is unlikely, but would warn of correction to the primary trendline.

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

The yield on ten-year Treasury Notes broke primary support at 2.00%, plunging to a low of 1.86% in the morning before recovering to 2.10% at the close. Expect strong support at 2.00*. 13-Week Twiggs Momentum (below zero) has been warning of a primary down-trend for some time. Recovery above 2.30 is unlikely at present.

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

Falling inflation expectations are behind the drop, with the 5-year inflation breakeven rate — 5-year treasury yields minus the 5-year TIPS rate — making a new 2-year low.

A falling dollar suggests that domestic purchases are driving the surge in Treasury prices, rather than international buyers. The Dollar Index is testing its new support level at 84.50. Respect would confirm a primary advance with a target of 89*. Rising 13-week Twiggs Momentum continues to indicate a healthy (primary) up-trend. Failure of support at 84.50 is unlikely, but breach of the secondary trendline would warn of a correction to the primary (trendline).

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

Low interest rates strengthen demand for gold as they reduce the carrying cost.

The Dollar Index is retracing to test its new support level at 84.50. Respect would confirm a primary advance with a target of 89*. Rising 13-week Twiggs Momentum continues to indicate a healthy primary up-trend. Failure of support (84.50) is unlikely, but breach of the secondary trendline would warn of a correction to the primary line.

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

The yield on ten-year Treasury Notes is again testing primary support at 2.30. Breach would signal a decline to 2.00*. A 13-week Twiggs Momentum peak below zero suggests a continued primary down-trend. Recovery above 2.65 is unlikely, but would indicate an advance to 3.00.

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

Low interest rates would weaken the Dollar and strengthen demand for gold.