Investing.com | Apr 30, 2017 07:35AM ET
by Pinchas Cohenh2 Last Week/h2
Geopolitics
Policy
Economy
Global equities rally on relief of eurozone risk, impending US tax cuts and earnings.
Yields advance to compensate for anticipated tax cuts
US 10-year Treasury yields reached 2.3485 on Wednesday, their highest level in 15 sessions. However, it was only part of a return move upon crossing below the neckline of a double top on April 12.
Case in point, the 10-Y note failed to hold on to its gains and fell below the neckline again, closing on Friday at 2.2802, slightly above the low of the day of 2.2767, in a sign of weakness. The height of the trading range throughout the formation of the double top of 3000 basis points suggests a target price of 2.000. First though it must contend with the 2000dma lying in wait at 2.0823.
This double top in yields is a mirror-image to the 10-year note price, which just completed a return move, after having completed a double bottom. This suggests price will rise from its current 125-23 to 127+. The technical picture of the supply-demand balance of powers may suggest investors' waning hope of reflation.
h3 Currencies/h3The Dollar Index closed down .04%.
The euro gained 0.2%, remaining within its trading range of the last five weeks and maintaining its gain on crossing the 200dma, despite the continuous dovish stance of the ECB.
The GBP closed on Friday at 1.2951, only 14 pips below the high of the day, at 1.2965, in a display of strength by pound bulls. They were able to maintain not just Friday's advance but that of the whole week, leaving their positions open over the weekend. Of course, quite a bit can happen before the coming week's trading begins, or be said by politicians, making their bullish actions a true sign of confidence in the pound.
This also marked the eighth trading session since the pound completed a six-month bottom – as it crosses over the 200dman for the first time since the Brexit vote, without batting an eye - when May reasserted leadership by announcing snap elections, sending the pound up 2.20% on April 18.
The JPY has been the loser among the headline currencies; it lost 2.20% to the dollar, but that makes sense during a risk-on week. The reversal formation in US bonds suggests risk-on may be ending.
From a technical standpoint, the USD/JPY’s rise is a correction within a downtrend this year. Once the pair reached the high of 111.78 on Wednesday (which formed a bearish Gravestone Doji) it stalled, which meant it has also been unable to overcome its previous peak on March 31, a strong indication the rally since April 15 has nothing to hold on to.
h2 Fed Decision, NFP, Earnings, French Debate/h2Summary
Saturday, May 6
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