Wednesday, January 20, 2010

USD Index correlations with SPX, Gold & 10-Year US Treasury Notes' Price














December 2009 risk taking/averting correlation trade broke down. Now seems SPX is moving higher along with USD appreciation as the overlay suggests.
















Gold corrected but the long-term trend is still holding above the bullish trendline.

The USD Index is looking like developing the Bullish Flag formation. I am skeptical of seeing Gold rally along with USD rally and I'm looking which one will break as I lean to the idea that Gold will correct further.



There is a cyclical pattern here in the 10-Year UST Note price and the range trade till Dec 2009 was going along the gradual depreciation of the USD.

Since Dec 2009 we have a pronounced bond selloff accompanied with USD rally which is maybe cashing out to buy on lower levels as bond yields will be watched vigilantly and they are certainly not liked above 3.60/70 as they put pressure on mortgage holders.

This is certainly a critically important factor and I'm watching closely for the developments here.

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