Commodity-Related Currencies Suggest Some Bonds, Currencies Finally Acting Bullish, but for How Long?

By Tim Thielen  JAN 24, 2012 9:20 AM

The Aussie/Yen, the Euro/US Dollar, the yield on the 10-Year T-Note, and the iShares High Yield Bond ETF are all displaying bullish (for risk assets) behavior.

 


Stocks and certain “risk” commodities have been on the rise for a while – even as the bond and currency markets were continuously sending contrary / bearish messages.  Now, however, at least I can say that the bond and currency markets are participating in the bullish (for risk assets) activity – even if they’re merely going along for the ride instead of leading. 
 
MESSAGE OF THE MARKETS

BONDS

The yield on the 10-Year US Treasury Note has reached my upside target – assuming this is just an upside correction.
 

Here’s where the 10-Year T-Note Yield should head now – again assuming the upside correction is over.
 

Junk bonds are finally acting the way one would expect in a bullish market condition.
 

CURRENCIES

The Aussie Dollar / Japanese Yen cross has rallied as expected and may have more to go on the upside after a brief correction.
 

The Euro / US Dollar (EURUSD) is rallying in the short-term as well – giving more of a boost to an already overbought equity market.
 

Overall, it’s nice to see some bullish action in the bond and currency markets to go along with what we’ve been seeing from equities.  However, the charts clearly show that there is critical resistance still to be conquered on the charts of the 10-Year Treasury Note, the JNK fund, the AUDJPY and the EURUSD.  If one or more of those charts experience upside breakouts above their respective resistance levels, we would likely see even more wind in the bulls’ sails.  Just don’t try to jump that breakout, though, as a failure at resistance on any of those charts could be a signal that things are going to turn back lower for all risk assets.

Twitter: @tttechnalytics

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.