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The transmission chain of U.S. debt, the U.S. dollar, and gold is tight. Which direction will the first card go?
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Hello everyone, today XM Forex will bring you "[XM Group]: The transmission chain of U.S. debt, U.S. dollar, and gold is tight, where will the first card fall?". Hope this helps you! The original content is as follows:
On Tuesday (November 18), U.S. bond yields continued their recent decline. The 10-year U.S. bond yield was last reported at 4.110%, an intraday drop of 0.68%; the U.S. dollar index fluctuated within a narrow range around 99.60; spot gold rose slightly by 0.06%. On the surface, the three are rising slightly at the same time, but the underlying drivers are different: the fall in U.S. bond yields reflects the market's renewed expectations for a December interest rate cut by the Federal Reserve. The U.S. dollar index has taken a temporary breather because the decline in yields has not yet xmtraders.completely broken through key support. Gold has maintained high fluctuations driven by risk aversion in the bond market. In the next 2-3 trading days, the trend of bond market yields will still be the core that dominates the short-term direction of the U.S. dollar and gold.
U.S. Treasury yields: The short-term downward channel has been established, pay attention to the breakthrough of the 4.074%-4.160% range
The 240-minute cycle of the 10-year U.S. Treasury yields is running in the downward channel. The latest quotation of 4.110% has fallen below the middle track of the Bollinger Bands of 4.117% and is approaching the lower track of 4.074%. Although the MACD indicator DIFF (0.006) and DEA (0.008) are still stuck together, the green column has enlarged, showing the accumulation of short kinetic energy.
In terms of fundamentals, starting this week, the backlog of economic data accumulated during the U.S. government shutdown will be released intensively, including Thursday’s September non-farm payrolls report. Market expectations are that the data will not significantly change the pattern of "weakening employment and sticky inflation." There are sharp differences between doves and hawks within the Fed, but dovish voices have been dominant recently - many directors said they are "no longer worried about accelerating inflation" and are more concerned about the cooling of the labor market. This is consistent with the tone that the October meeting minutes may reveal that "an interest rate cut in December is not a certainty, but it is far from ruled out."
In addition, the market’s response to TrumpConcerns over President Trump's tariff remarks continue. The tariff remarks are seen as a risk to upward inflation in the medium term, but in the short term they have strengthened the logic that the Federal Reserve must preemptively cut interest rates to offset the decline in demand, causing pressure on U.S. bond yields. Well-known macro institutions pointed out that "more and more hawks, neutrals and even the original dovish FOMC members tend to believe that the current data is not enough to support an interest rate cut in December." However, this view shows that unless this week's data significantly subverts expectations, the probability of yields continuing to decline is greater than rebounding.
Short-term key range: 4.074%-4.160%.
-If it breaks below 4.074%, the lower edge of the channel will open, further pointing to the 4.03%-4.05% area;
-If it rebounds stimulated by data or minutes, the upper pressure will first look at the middle rail of 4.117%, and then the upper rail of 4.160%.
The focus during the session will be on the October FOMC meeting minutes at 23:00 Beijing time on Wednesday, and the impact of September non-agricultural data on yields at 21:30 on Thursday.
U.S. dollar index: Yield drag and technical support game, 99.02-99.67 becomes the key range
The 240-minute chart of the U.S. dollar index is suppressed by the middle track of the Bollinger Bands at 99.3455, and the latest quote of 99.5921 is located in the upper half between the middle track and the upper track of 99.6707. The MACD indicator shows a slight dead cross and the red column shrinks, indicating that the bullish momentum is exhausted.
From the perspective of U.S. debt transmission logic, every 10 basis points drop in the 10-year yield usually corresponds to a 0.25-0.35 point drop in the U.S. dollar index. The current yield has fallen by 37 basis points from last week's high of around 4.48%, but the U.S. dollar index has only retreated by about 0.8%, indicating that the 99.00-99.02 area has strong support and short-term bears have not fully taken the initiative.
Many well-known trading institutions agree with analysts:
"As long as the 10-year yield holds support at 4.07%, the U.S. dollar index is unlikely to experience a unilateral decline";
"On the contrary, if the yield falls below 4.07%, the 99.00 mark will fall, and the U.S. dollar index may backtest 98.30-98.50."
Short-term key range: 99.02-99.67.
-99.67 above is the watershed between bulls and bears. If it stands firm, the possibility of returning to 99.80-100.00 in the short term will increase;
-Once 99.02 below falls, it will open up the downside space, pointing towards 98.50.
If U.S. bond yields continue to fall in the next 2-3 days, the U.S. dollar index is likely to fluctuate downward, with gains and losses at 99.02 determining the pace.
Spot gold: The bond market is dominated by risk aversion and fluctuates at high levels, and the hedging premium has not been fully released
The latest quotation of spot gold in the 240-minute chart is US$4,047.67, running within the wide channel from the middle track of the Bollinger Bands from 4014.28 to the upper track of 4236.84. Although MACD maintains a dead cross, the green column has shortened, speedThe line gap narrows, indicating the exhaustion of kinetic energy below.
The current core driver of gold is the safe-haven premium brought about by rising bond market volatility. The yield on the 10-year U.S. Treasury note has fluctuated violently since early November. The xmtraders.combination of global trade uncertainty caused by Trump's tariff remarks and the stalemate between Russia and Ukraine have jointly boosted investors' safe-haven demand for U.S. bonds and gold. Market observers pointed out that "the current rise in gold is more a mirror reflection of the risk aversion sentiment in the bond market than a simple logic of real interest rates."
Technically, the integer mark of $4,000 has been transformed into support, and the 4014 mid-track has been stepped back many times and cannot be broken, strengthening the control of bulls. The upper pressure is concentrated in the early high point concentration area of 4100-4120, as well as the 4236 Bollinger upper track.
Short-term key range: 3971-4236.
-The 3971-3980 area below is strong support, and the probability of failure is low;
-If the upper part breaks through 4100-4120, the short-term point will be to the upper track of 4200-4236.
The focus during the session was on whether U.S. bond yields would fall to 4.07%, triggering a second amplification of gold’s risk aversion sentiment.
Overall outlook for the next 2-3 days
In the next 2-3 trading days, the core variable that dominates the market will still be the direction of U.S. bond yields:
If the 10-year yield continues to decline, the U.S. dollar index is likely to fluctuate downward in the range of 99.02-99.67, with gains and losses at 99.02 determining the rhythm; gold will maintain high fluctuations under the support of risk aversion in the bond market, and focus on observing whether it breaks through 4100-4120.
On the contrary, if Wednesday’s meeting minutes or Thursday’s data trigger a hawkish-than-expected interpretation, causing yields to rebound to above 4.16%, the U.S. dollar index is expected to return to 99.80-100.00, while gold will face correction pressure, with short-term support at 4014-3980.
Currently, the bond market transmission path has replaced the traditional real interest rate framework and become the main logic that dominates the short-term fluctuations of the US dollar and gold, which deserves investors' attention.
The above content is all about "[XM Group]: The transmission chain of U.S. debt, U.S. dollar, and gold is tight, which way will the first card fall?". It was carefully xmtraders.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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