Hello traders, I’m back from an awesome vacation and super excited to jump back into Elliott waves. I really missed charting while I was away. I’m back in the office now, and its takes a bit to get fully back into the markets. I spent a lot of hours in the last few days, going through the latest developments. Anyway, below I want to share with you the US yields that recently turned back up with USD which seem to have room for more near-term strength.
I will also make sure to send a record some video this week. If you are not a member yet, make sure to check our services and be up to date with the waves. GH
The USD has recently demonstrated an upward trend, despite the release of lower inflation data last week. This could be attributed to the Federal Reserve’s (FED) desire to gather more comprehensive inflation and employment statistics before considering an end to their cycle of interest rate hikes. Consequently, there remains a possibility that the FED might continue with further rate hikes until these critical data points are assessed. It’s important to note that the current period is mid-August, a time when market activity traditionally slows down. Hence, the observed decline in stock prices, contributing to the USD’s ascent, is a predictable outcome.
Examining the graph depicting the relationship between US yield and the USD Index, it’s evident that yields are progressing through a fifth wave. However, historical patterns indicate that a cycle often shifts after the completion of a five-wave movement. This transition could potentially occur this year, as suggested by the 10-year US yield weekly chart. Should yields indeed be entering the latter stages of recovery and the FED consider concluding its rate hike cycle by year-end, this might serve as a catalyst for a downward trajectory in the DXY (USD Index). This reversal could initiate around the technical resistance level of 105. Concurrently, the 10-year US yields could stabilize around the 4.5%.
So longer term, I think dollar weakness will still show up, but in the short-term there can be some more dollar strength, thus an opportunity to short some weak currencies like AUD or NZD.
Trade well,
Grega
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