But, we can now see there is some significant resistance ahead for rates and the USD. There are many technical reasons but ultimately the next move will be decided by a few sentences spoken by Bernanke on Wednesday.
Either way, here is a look at the US 10's and it shows some strong resistance at 2.75%/2.78%. For me this level is crucial as if we see a further sell off in UST's then 3% is most likely.
|UST 10Y. Reuters|
Furthemore looking at the US 2s10s, we can see it has come a long way in the past few weeks (unsurprisingly) but it looks like it can't really go too much higher in terms of a long timeframe trade.
So what does this mean for the USD? Well, with the higher yields the USD is becoming more and more attractive and this has actually lead through into a higher USD as we appear to be coming out of the worst parts of the global recession. This is shown by the shift in correlation between USD +UST's from negative to positive as the US economy has strengthened when considering 100 periods.
So we can see that if yields turn around the USD will likely follow, on top of this, stochastics look prime for a crossover signalling a top in the market.
Overall I'm looking for a move back to 2.6% on the 10 year and 84 to 83.50 on DXY.