Treasury Yields and the Dollar

Both the 10-Year Treasury yield and the US Dollar index are at technical tipping points.

As shown in the first chart below, the yield on the 10-Year is hitting resistance at the top of its downtrend line. Since stocks have been moving up as Treasury yields have risen (and fallen as yields have fallen), it would be nice to see this downtrend broken.

While it's hard to find many positives with the chart of the US Dollar, it has at least made a short-term bottom in recent weeks and is currently in a "flag" pattern. When this happens, the price eventually breaks big to the upside or downside.

Comments

[sorgmot:]

We have the view that the USA dollar will continue to fall against the Euro and not so much against the Yen. USA dollar interest rates will be dragged upward by the huge losses in USA mortgages, house values, stocks, and bonds. Foreigners are and will continue to loose huge amounts in USA dollar investments expressed in USA dollars and will drag the money home for better returns. They will find it costly to underwrite exports to the USA and will pull their funds out and into their own currency as soon as possible. USA interest rates are now going up a multi decade hill as they try to overtake inflation.

Visit us at financialtrax.googlepa...

To see why we believe that the long term decline in interest rates will reverse to increasing interest rates until 2050.

2008 Apr 16 03:09 PM

[jo0hn2:]

sorgmot- The fed, despite the news on inflation, has itself stated that it does not see the need to put caution on cutting interest rates and european banks arent going to cut their rates thats a deffinite. So if both parties plan on being that stubborn despite what they see in front of them it will take them a while to change and go into your positive direction. Oh and england is also starting to waver on the idea of helping the u.s. at all costs. Its hard to tell what your trying to say with that first sentence. so what you think its going to go down in the long term then up later? or do you go along with the rest of your paragraph saying that it will go up as nations take their money of the dollar? therby forcing the fed to increase rates.

2008 Apr 16 05:04 PM

[outtafavr:]

Does the fed determine interest rates? Historically, they have. The high interest rates suggested in this article would fly in the face of history. In light of weakness and potential disaster in the U.S. economy, will Uncle Sam's lenders be satisfied with miniscule returns? It may depend on investment alternatives to U.S. bonds at the time. It may also depend on Uncle Sam's appetite for borrowed cash. If there's one thing we know about America and Americans, they love to borrow and spend other people's money. My guess is that America's appetite for borrowed money in the future will exceed foreigner's willingness to lend. That means higher interest rates. The fed will sit and watch. Their "target" rate will be laughable! Higher interest rates would give much needed support to the dollar. Is now the time for this new beginning? Those charts above say it could well be!

2008 Apr 24 07:26 PM