U.S. Treasuries Continue to Deliver Higher Rates
U.S. Treasury prices continue to drive lower this week, taking yields on U.S. securities and the Dollar Index higher. Here’s a weekly chart of the front month Two-year Treasury futures contract which trades on the CME here in Chicago:
While some analysts study commodity markets as a hint to future price direction for currency pairs, experienced traders understand the importance of the more direct relationship between interest rates in the open market and currencies. Treasuries, like currencies, tend to have more orderly trends in times of more stable economics. No doubt it’s always tricky taking hints in one market as to the direction of another market. The rule of thumb is adhere to the set-up and signal in the market you’re trading or investing in, and don’t get distracted by what may or may not be happening in another market. It took over a month from the time Chairman Bernanke first announced Federal Reserve support for U.S. mortgage backs and treasuries would be withdrawn by March 2010 — virtually assuring higher U.S. rates — along with a lot of jawboning by central bankers, for the Greenback to turn higher. But when it flashed a buy signal on Dec 4 — see chart below — following the better than expected U.S. jobs data, there was no looking back.
Jay Norris
www.trading-u.com
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential that changing political/economic conditions may substantially affect the price/liquidity of a currency. Investors may lose all or more than their original investments.