My question is to what extent is anyone using the US 10-year treasury note yield chart in their projections for the USD forex charts? And indexes, such as the FXCM’s USDOLLAR?
When I superimpose the USDOLLAR over the US 10-Year bond yield, I can see a correlation. But because the USDOLLAR doesn’t vary much, the visual isn’t very dramatic.
On the other hand, the inverse correlation between the US 10-Year Bond Yield and the US 10-Year Bond Price is very clear to see… though as you can see from the attached chart, there have been times where they ran together for a time.
Assuming the inverse relation between the bond price and the bond yield is fairly reliable, it tracks that the yield can perhaps be used as an indicator for the USD to some degree.
But as someone new to this game, I can’t be sure. So here I am to ask folks more seasoned than me : )
The market is founded on risk - generally accepted that the market views the least risky instrument is US Govt bonds.
Happens that in FX the first Friday is viewed as having the greatest potential for volatility - so much so that many stay out on this day.
Being a singular risk day then good to view price on a hr1 - the US 10yr is associated with the shorter term frame.
Investors buy the bond as a risk aversion instrument - likewise Gold and Yen - reasons a longer story.
If investors seek risk then they will neither buy bonds, Yen or Gold - instead the stock market will beckon.
This is becoming a longer post - in stocks small caps are the riskiest - and with risk comes potential gain - many guys were noting back a week ago on the Russell 2000 (small caps) huge buying.
Long story short - 1st chart past 3 days - US Bonds price (price goes down = bond selling)
Hmmm - see the dbl top before today - the market dumped risk today.
Then again what about Gold?
Hmmm - Gold got sold in the risk on (signalled perhaps with the dbl top in the 10yr?
So what about Yen?
Unreal! - after yesterday’s huge move to the downside on USD/JPY the market actually sold off Yen to half that move
At the risk of getting a reprimand from BP for replying yet a 3rd time -
Oft times a retrace to the half way line and then reverse is seen as an attempt by the contrarians, more often it’s a case of catching the missed (gapped) orders who were left behind.
A fib chart (russell 2000 hr1) of what I’m gabbling about - it’s Friday night
Generally, when the yield on the 10-year U.S. Treasury note rises, it indicates an increase in interest rates in the U.S.
Higher interest rates can make the U.S. dollar more attractive to investors, as they can earn more on investments denominated in USD. This increased demand for the dollar can lead to an appreciation in its value.
While hile there is a correlation between the 10-year Treasury yield and the USD, it is not always a direct causation.
Other factors can influence both like global risk sentiment, political uncertainty, and monetary policy divergences between the Fed and other central banks.
Many thanks to all for your kind insight; much appreciated!
I’m late returning to this thread, as I’ve been processing the charts I’ve been tracking for correlation on this point in light of the recent large movements of the USD.
Based on my observations, your kind guidance that the correlation to the bond yield is more of a stew than a mirror makes sense. Same with gold. On this recent move the correlation was astounding (pics attached). This move was highly education for examining possible correlation with the bond yield, the note price and the price of gold. 🙇🏽♂️
