While we’ve all been glorifying in the unending record peaks in stocks markets, bond yields have been trying to move higher. Since mid-summer when the yield on the US 10-year dropped to 1.12% on two separate occasions, traders have been selling debt so pushing up yields.
Yesterday, the benchmark 10-year yield rose to a critical breakout level and a high of 1.38%. This mark has not been seen since mid-July and should be a key focus for many in the market. Rising yields put pressure on gold and also the Japanese yen.
Yields above 1.38% could also mean increased volatility across asset classes after complacency has taken hold amid quiet summer markets.
USD/JPY pops higher
The new leadership in Japan is bringing with it much anticipation of more fiscal stimulus. This is boosting the Nikkei, with a new election also potentially seeing more inflation. USD/JPY is a prime currency mover on higher US yields and we saw a jump yesterday above 110 and the 50-day moving average.
Free Reports:
Get our Weekly Commitment of Traders Reports - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.
Sign Up for Our Stock Market Newsletter – Get updated on News, Charts & Rankings of Public Companies when you join our Stocks Newsletter
If we do get a breakout in the long end of the bond curve, this currency major could finally move out of its recent range. The August high at 110.80 is the first target for the bulls in USD/JPY with the cycle high at 111.659. The 100-day moving average is acting as support around 109.74.
Gold tanking on strong dollar and yields
Gold bugs got excited when we touched recent highs at $1834 last Friday after the disappointing payrolls data. But that seems to be the end of the rally for now as the precious metal plunged yesterday on rising yields and a rebounding dollar.
Prices are now approaching trendline resistance from the June highs which now acts as support around $1785. The 38.2% Fibonacci retracement of the recent rally also sits near here at $1777.
Investors may have one eye on the ECB meeting tomorrow for any hints that we get a reduction in the emergency stimulus bond buying program, which the hawks have recently been demanding.
We note too that nothing much is expected from the Bank of Canada meeting this afternoon, principally in light on the imminent federal election.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
Article by ForexTime
ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com
- PBoC kept the interest rate unchanged. The US stock indices rise despite rising manufacturing inflation May 15, 2024
- Meme-stock mania: Will GameStop, AMC stocks surge even higher? May 15, 2024
- Euro climbs to five-week high ahead of US CPI data May 15, 2024
- Australia will release its annual budget today. Rising inflation expectations hurt US stock indices May 14, 2024
- JPY declines again May 14, 2024
- Trade of the Week: CHINAH to extend lead as Asia’s winner? May 13, 2024
- The German index has hit an all-time high. China sees rising consumer inflation May 13, 2024
- Brent crude oil faces downward pressure amid demand uncertainties May 13, 2024
- COT Metals Charts: Speculator bets led by Platinum & Copper May 11, 2024
- COT Bonds Charts: Speculator bets led by Fed Funds & Ultra 10-Year Bonds May 11, 2024