DXY in new records, as Yields are decreasing

Author: Ahura Chalki

Tuesday, 05 July 2022 Number of words: 391 Study time: 2 Minutes Views: 467

DXY analysis

After a long holiday weekend, the US dollar started a trading week with a super bull run, printing new records. On the stock markets, prices are falling rapidly, and rates are back under 3% for 10-year benchmark Treasury Yields.

Stagnation seems more real every day

Fear of worse days, increasing USD demand. The US Dollar is the primary beneficiary of safe-haven demand, while recession fears are increasing and Stagflation gets more scary and touchable day after day. In contrast, many still expect another 75 bps rate hike in the 26-27 FOMC monetary policy meeting. Most other markets lost their interest in investors after a lack of hope for a faster recovery. 

On the stock markets, numbers are also getting lower and lower, as the USVIX index is again back above 29, after a few days of decline in the last days of the previous week. 

During the first trading hours, the Dow Jones Industrial Average was down 580 points, or 1.9%, while the S&P 500 lost 1.4%, and the NASDAQ Composite was down 1.2%. In the beginning, they were mostly lower before a slight correction. 

This week we will have too much data to watch, especially Friday's US monthly non-farm employment report. Before that, investors will be watching the minutes of the Federal Reserve's June policy meeting. 

Besides economic data and US conditions, the weakening of the Euro also helped the US index grow more, as the Euro has the most prominent part in the basket against the US dollar. Recession fears in Europe seem closer as Euro hits a 20-year low on Tuesday. Today Euro tested a new 20-year low against the USD. The economic data coming out of Europe is not pleasing to investors, while higher energy prices put more pressure on European economic growth every day.

This pressure on the economy decreases the ECB's interest rate hike possibilities, further devaluing the Euro against its competitors.

Tuesday was not such a good day in the European stock markets. Leading EU indices fell over 2%, while bond yields tumbled in response to the current situation. US 10-year treasury Yields fell under 3%, last seen at 2.834%. Yields on 10-year German bunds also were down to 1.219%. 

On the technical front, everything is about a bullish trend, and even if we see a correction, it is about more raises as long as the index is trading above the 101 mark.

DXY analysis


Source: IFC Markets
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