We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
GBP/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
Oil - US Crude
Mixed
Bitcoin
Bearish
More View more
Real Time News
  • The Australian Dollar was focused on its home country in the past week, but that is likely to change sharply in the days ahead with major global risk events coming up. Get your $AUDUSD market update from @DavidCottleFX here: https://t.co/yZz3hCyVMx https://t.co/1xw1JHwd7l
  • The #Euro broke chart resistance, threatening to challenge the bounds of its longer -term downtrend against the $USD. Bulls may find it premature to celebrate however. Get your market update from @IlyaSpivak here: https://t.co/VfR13llYbW https://t.co/LiWTvIygxc
  • The $USD appears to be stalling against the Singapore Dollar, Malaysian Ringgit, Indonesian Rupiah and Philippine Peso, but technical analysis may still favor USD strength. Get your market update from @ddubrovskyFX here:https://t.co/AZp98MoXKo https://t.co/jgZMUFVGJB
  • The Indian Rupee soared after the Reserve Bank of India surprised with a rate hold. $USDINR may climb as support reinstates the uptrend ahead of Indian CPI and global trade tensions. Get your market update from @ddubrovskyFX here:https://t.co/QEOabsDfMn https://t.co/rqn8Zjrvkv
  • #Gold closed lower after paring early-week gains post-NFP on Friday. But will price finally break support? These are levels that matter on the $XAUUSD weekly chart. Get your $gld technical analysis from @MBForex here: https://t.co/RILBGhLAQZ https://t.co/q5znMUlEQA
  • German Bund Yields Update: 2-Year: -0.639% 3-Year: -0.651% 5-Year: -0.548% 7-Year: -0.480% 10-Year: -0.290% 30-Year: 0.228%
  • The $AUD erased half of November’s down move in a mere two days but the dominant trend bias continues to favor weakness ahead. Get your market update from @IlyaSpivak here:https://t.co/ShYksfNXyS https://t.co/OVhyNgLRn5
  • We were almost there, but the $SPX fell short of a >1.0% daily change. That raises the tally to 39 consecutive trading days without a climb or fall of even a moderate measure https://t.co/ibt82dBGmh
  • En español: El oro tropieza y se precipita en caída libre. ¿Qué explica las pérdidas del metal dorado y la alta volatilidad en los mercados financieros? #XAUUSD #trading $gold https://t.co/Hdsd0z1qih https://t.co/WKnGaABVS8
  • Forex Update: As of 21:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.35% 🇦🇺AUD: 0.17% 🇯🇵JPY: 0.14% 🇨🇭CHF: -0.30% 🇪🇺EUR: -0.38% 🇨🇦CAD: -0.59% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/lrSRyCHLjw
US Recession Watch - US Yield Curve Inverts, But Panic When it Steepens

US Recession Watch - US Yield Curve Inverts, But Panic When it Steepens

2019-08-14 11:00:00
Justin McQueen, Analyst
Share:

US Treasury Curve Inversion Analysis and Talking Points:

  • US 2s10s Treasury Curve Inverts for the First Time Since 2007
  • Yield Curve Inversion: Predictor of Recessions
  • Panic When the Yield Curve Steepens

See our quarterly FX forecast to learn what will drive prices throughout Q3!

US 2s10s Treasury Curve Inverts for the First Time Since 2007

The US 2s10s curve has inverted for the first time since 2007, however, this had been a long time coming given the deep inversion in the 3M-10yr curve. Alongside this, while today’s inversion is seen as more symbolic, it does provide yet another reminder in regard to rising fears of a slowdown in the global economy, particularly noted in the global bond market as yields drop towards record lows (US 30yr now yielding an all-time low of 2.06%).

Why Does the US Yield Curve Inversion Matter?

Market Reaction to Symbolic Inversion

In reaction to the 2s10s inversion, safe havens had benefitted with USDJPY dropping to session lows of 106.13, gold pushed towards its best levels of the day at $1508, while US equity futures headed lower, although moves have been relatively contained thus far. In turn, this increases the importance of next week’s main focus in the form of the Jackson Hole Symposium, which quite fittingly is titled the “Challenges of Monetary Policy”.

USDJPY Price Chart: 1-minute Time Frame (Intra-day)

US Recession Watch - US Yield Curve Inverts, But Panic When it Steepens

S&P 500 Price Chart: 1-minute Time Frame (Intra-day)

US Recession Watch - US Yield Curve Inverts, But Panic When it Steepens

Yield Curve Inversion: Predictor of Recessions

While an inversion of the US yield curve has been a reliable indicator for warning of an economic recession, predicting the past 5 recessions and almost all US recessions in the past century. The actual inversion is unlikely to cause an immediate concern given that it usually takes 20 months before a recession hits the economy.

US Recession Watch - US Yield Curve Inverts, But Panic When it Steepens

Source: DailyFX

Panic When the Yield Curve Steepens

As mentioned above the US yield curve has been reliable in regard to predicting recessions, however it does not provide a great signal as to when a potential recession will happen. Instead, investors should really fear the yield curve steepener given that it is closer to the actual event, as such, the steepening of a yield provides the near-term signal that a slowdown has arrived. Consequently, over the past 5 recessions the steepening of the yield has happened at a time when a slowdown has been imminent.

US Recession Watch - US Yield Curve Inverts, But Panic When it Steepens

FX TRADING RESOURCES:

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.