The most important chart in the world is back in action!
A rising US dollar is generating increased selling pressure for risk assets and global currencies.
US Treasury bonds, stock indexes, and even commodities are catching lower.
Yet it’s nothing new for the top components of the US Dollar Index $DXY (the euro leads at 57.6%, followed by the yen at 13.6% and the pound at 11.9%).
New lows and broken support have become standard for these currencies.
But King Dollar’s command is spreading to the more resilient pockets of the forex market, as fresh breakouts mount.
Here’s the US dollar-Canadian dollar pair breaking above a key retracement level to six-month highs following a litany of missed attempts:
Earlier in spring, I wrote a note highlighting wheat’s tendency to lead crude oil at key inflection points.
While this statement is mostly true, it needs clarification.
Chicago wheat does have a tendency to lead crude oil at significant market tops. But crude leads at critical troughs.
Check out the crude oil overlaid with Chicago wheat futures:
Notice crude bottomed in Q1 of 2009, 2016, and earlier this year. Chicago wheat followed roughly six to nine months later, marking critical turning points in late Q3 of 2009 and 2016.
US T-bonds are sliding to fresh decade lows. The S&P 500 completed a three-month top last week. And the Nasdaq 100 is on the verge of doing the same.
Those summer highs are receding into the collective memory bank, replaced by new lows and growing unease. Sellers are out in full force.
But instead of allowing the near-term selling pressure and overall choppy conditions to throw us off balance, let’s focus on the one underlying trend tying this market together…
The US Dollar Index $DXY hit a new year-to-date high on Monday, punishing other global currencies.
The euro undercut its June pivot lows. The pound dropped for the fourth consecutive session. And the yen is well within reach of its lowest level since the summer of 1990.
Other major currencies don’t stand a chance against USD strength.
If you can’t beat them, join them!
The Swiss franc might be the next to succumb to this old proverb as it prepares to bend the knee.
Check out the US dollar-Swiss franc pair pulling back after posting a new eight-year low:
Bonds across the curve are skidding to fresh contract lows as interest rates have a one-track mind…
Higher!
Check out the US 10-year yield posting fresh sixteen-year highs:
Not to be outdone, the 2-year yield just registered its highest level in seventeen years.
Interest rates across the curve are breaking to decade-plus highs in what has become a foot race.
It’s clear that the rising rate environment remains alive and well. An inverted yield curve keeps score, reminding us that shorter-duration yields are winning.
But I honestly don’t care what area of the curve is leading.
