Don’t take your eyes off the US dollar and interest rates!
I know it’s been a long year, but we’re finally witnessing early signs of potential trend reversals. The breakdown in the dollar last week confirmed the mounting evidence suggesting the USD has reached its peak.
Now, will interest rates follow?
Check out the dual pane chart of the US dollar index $DXY and the 30-year yield $TYX:
They look almost identical. The recent breakdown in the dollar marks the lone flaw between the two, raising the question…
Will the strong relationship between rates and the dollar hold?
I won’t pretend to know where rates are headed. But if the dollar and rates remain on similar paths, my money is on declining yields at the longer end of the curve.
A falling 30-year yield also makes sense based on a...