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The Euro Jumps Aboard the Bull's Train, but the Aussie Dollar Is Being a Wet Blanket


The euro-US dollar cross was finally able to conquer its short-term resistance over the last few days. But that's not the end of the story.


Emerging markets bonds are breaking support?

If the global economy is really improving, we absolutely should not only see interest rates moving higher, but also other risk "tells" like the iShares JPMorgan US Dollar Emerging Market Bond ETF (NYSEARCA:EMB). The reality, however, is that EMB is breaking and possibly closing below its reliable 14-day moving average line right now. If the weekly close in EMB is below support on Friday's close, I wouldn't imagine it would be that well received by risk bulls.

Click to enlarge

Conclusions from bond land:

It's a mixed bag in bonds. First, we have the rising yields on Treasuries – which is bullish for risk assets. On the other hand, what's the EMB doing floundering around below its key support / resistance line? The action in junk bonds is still pretty benign, so we have to remain in split-decision mode in terms of "bullish" or "bearish" messages being sent to us from bonds.


As I noted throughout this report, while it's great to see the euro / US dollar breaking resistance – we must remember that it is short-term resistance that it's conquering and that the overall chart for EURUSD remains in fairly bearish. Couple that dynamic with the other mixed messages we're getting from both currencies and bonds and you get a pretty compelling argument to remain invested in risk assets, but with one foot out the door.

Twitter: @tttechnalytics

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