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Currency Markets: US Dollar Index Still Seeking 79, Treasury Notes Rally Into Resistance


The currency markets remain choppy, and the euro is hanging tough. Bonds are at a key level.

The US Dollar Index has been trying to establish support over the past week or so around the 79 level, but it just can't seem to get a significant bounce off this level.

The upside opportunity still outweighs the downside risk in my opinion, and longer-term support is creeping higher with the 200-day moving average just below 78. However, until we see momentum above the 79.5-80 level, we could just consolidate here for a little while.

See the trading range below -- time to be patient and see which way the market wants this one to go longer term.

Click to enlarge

While most currency crosses seem to be consolidating to me, I do still like the short setup in the EURGBP. The longer-term trend is lower, and the shorter-term pattern should provide heavy resistance here around 0.835-0.84, which happens to be the underside of the head-and-shoulders neckline. This one has been choppy as well, but I still think offers a good risk-reward short with some patience.

Click to enlarge

One chart that I think it pretty interesting here is the yield on US 10 Year Treasury Notes. After the big bond sell-off in the middle of March, notes have rallied back into resistance (yields pulled back to support), and it looks like the 10-year note is setting up for a good risk-reward short.

June notes should have significant resistance at 130, and this translates to the 10-year yield having strong support around 2.15%. As you can see in the below chart, the 10-year yield has peaked around 2.40% in each of the last two bond sell-offs, and a close above that level could mean the next stop for the 10-year yield is 3%!

See the pullback in yields below…good luck out there!

Click to enlarge
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Positions in EURUSD, EURGBP, USDCHF, ZN futures
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