USD surged broadly overnight as boosted by the strong rally in treasury yields. But still, it’s just trading as the second strongest major currency this week, following EUR. And because of that, the dollar index is still bounded in recently established range, held below 55 day EMA.
Taking a look at 10 year yield, TNX’s strong rise yesterday now suggests that the pull back from Feb’s high at 2.943 has completed and the medium term up trend is resuming. Focus will be on this 2.943 resistance today, if not taken out, early next week. A firm break there should likely push TNX through 2013 high at 2.036. That will be an important signal of reversal of the multi decade down trend.
For dollar index, we maintained our view that a breakout is imminent as it’s close to medium term falling trend line. If the break out is accompanied by surge in treasury yield, then favor will be on the case of an upside breakout for bullish reversal. And in that case, we would likely see EUR/USD dropping through 1.22 handle. Let’s see how it’s going to play out.
