Bond Market : Currency is another form of bonds. Changes in the yield rate of bond market have a significant impact on the currency's value, and the US dollar index is no exception. On May 9, the 10-year U.S. Treasury yield hit a three-and-a-half-year high of 3.203%, and then began to decline. On the 17th, the second high was formed at 2.997%, and the two highs decreased in turn, indicating that there may be a continuous decline in the future. Judging from the recent statements by Fed officials, everyone is extremely hawkish, and they don’t seem to want bond yields to fall. For example, former Fed Vice Chairman Clarida, who rarely speaks publicly, said on May 9: "Quickly 'reaching neutral' will not be enough to bring inflation back to the long-term goal of 2%. I think the federal funds rate will eventually need to be raised to a restrictive area, at least 1 percentage point higher than the nominal neutral rate of 2.5%"; for example, current Chairman Powell said on May 17 that the Fed will continue to raise interest rates without hesitation until inflation falls. Such an absolute speech is rare. It can be seen that all the Fed officials are overwhelmed by the unprecedented hyperinflation in the United States. You should know that the latest CPI in the United States is 8.5%, and the Fed's long-term regulatory target is 2%. The gap between the two is very large. It is not an exaggeration to say that the United States is experiencing hyperinflation at this stage. However, everyone overlooked a problem: if economic growth is not strong enough, rapid interest rate hikes will destroy the investment intention of enterprises and individuals. The shrinking demand side will indeed play a role in curbing prices, but the side effect is to lead to economic recession. If interest rate hikes suppress high inflation but GDP growth turns negative, then both the US Treasury yield and the US dollar index will inevitably fall sharply.
USD index : There is no doubt that the US index is still significantly bullish and is still bullish in the medium and long term, but it is dragged down by the decline in US Treasury yields in the short term, and it is very likely to see a significant decline. The latest support is at the low of 102.34 on May 5. If the U.S. Treasury yield does not stop falling, the U.S. index has a high probability of touching this price. The ECB president recently said: The ECB will initially end its bond purchases in the third quarter of this year, and will decide to raise interest rates within a few weeks. This is another factor in our short-term bearishness of the US dollar index. US debt only reflects the US's own economic situation, but the US index will also be affected by the euro zone monetary policy. The weak U.S. Treasury yields combined with the ECB's expectation of interest rate hikes may shake the confidence of some U.S. dollar long holders.
USD Index Technical Survey :
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Summary: ATFX analyst team: In the long run, the USD Index is likely to break the 110 integer mark, but this kind of upward break cannot be achieved overnight. At least one large callback will be experienced in the middle. U.S. Treasury yields are reliable forward-looking indicators. When they continue to fall, you must be vigilant about the trend of the U.S. index.
ATFX risk warning and disclaimer: The market is risky, and investment should be cautious. The above content only represents the view of the analyst and does not constitute any operational suggestions.
This article comes from the financial industry
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