0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
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
Oil - US Crude
Mixed
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
Wall Street
Bullish
Gold
Bearish
GBP/USD
Mixed
USD/JPY
Mixed
More View more
Real Time News
  • 🇦🇺 Ai Group Services Index (JUL) Actual: 44 Previous: 31.5 https://www.dailyfx.com/economic-calendar#2020-08-06
  • Heads Up:🇦🇺 Ai Group Services Index (JUL) due at 22:30 GMT (15min) Previous: 31.5 https://www.dailyfx.com/economic-calendar#2020-08-06
  • After a brief pause at the end of July, the #gold price rally has resumed full steam ahead in August, with fresh all-time highs emerging for each of the past three days.Get your $XAUUSD market update from @CVecchioFX here: https://t.co/tNl7KTX8CD https://t.co/4I5nHcw1GM
  • $USDJPY Daily Pivot Points: S3: 104.74 S2: 105.3 S1: 105.52 R1: 106.08 R2: 106.42 R3: 106.98 https://www.dailyfx.com/pivot-points?ref=SubNav?utm_source=Twitter&utm_medium=DFXGeneric&utm_campaign=twr
  • White House Chief of Staff Meadows says stimulus discussions will last as long as needed tonight - BBG
  • Forex Update: As of 20:00, these are your best and worst performers based on the London trading schedule: 🇦🇺AUD: 0.61% 🇳🇿NZD: 0.60% 🇬🇧GBP: 0.21% 🇯🇵JPY: 0.05% 🇨🇭CHF: -0.14% 🇨🇦CAD: -0.34% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/tnW4af9aVr
  • Commodities Update: As of 20:00, these are your best and worst performers based on the London trading schedule: Silver: 7.24% Gold: 1.33% Oil - US Crude: 0.23% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/YbvtFCzKwH
  • US moves to tighten disclosure requirements for Chinese listed securities on US exchanges - BBG
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 95.93%, while traders in US 500 are at opposite extremes with 76.34%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/2L02UUzPZP
  • The S&P 500 continues its move higher on Thursday with investor hopes for fiscal stimulus rise as the stalemate in congress endures. Now within 2% of its prior all-time high,Get your S&P500 market update from @FxWestwater here:https://t.co/LQvQw51Vcy https://t.co/ttKETOBHeU
US Dollar Slammed as Safe Haven Demand Surges

US Dollar Slammed as Safe Haven Demand Surges

2017-08-29 11:37:00
Christopher Vecchio, CFA, Senior Strategist
Share:

Talking Points:

- Gold, the 10-year US Treasury yield, and the Japanese Yen have all moved in lockstep for the past three months.

- Meanwhile, US Dollar weakness is providing cover for otherwise weak currencies like the British Pound and New Zealand Dollar.

- Retail crowd positioning has blown back out to extreme levels in USD-pairs once again.

Upcoming Webinars for Week of August 27 to September 1, 2017

Tuesday at 9:45 EDT/13:45 GMT: Live Event Coverage: US Consumer Confidence (AUG)

Wednesday at 6:00 EDT/10:00 GMT: Mid-Week Trading Q&A

Thursday at 7:30 EDT/11:30 GMT: Central Bank Weekly

See the full DailyFX Webinar Calendar for other upcoming strategy sessions

The US Dollar (via DXY Index) fell to fresh yearly lows today, and its lowest level since January 2015, as a North Korea missile test over Japan sparked a fresh shift to safe haven assets across the globe. With investors seeking shelter in US Treasuries, US yields have fallen; and, given the strong relationship among US yields, Gold, and the Japanese Yen in recent months, it's no surprise that Gold and the Yen are doing quite well today.

Chart 1: Gold versus USD/JPY (inverse) versus 10-year US Yield (inverse) 4-hour Timeframe (May 7 to August 29, 2017)

US Dollar Slammed as Safe Haven Demand Surges

The 10-year US Treasury yield is at its lowest level since mid-June, and with it, US real yields have fallen as well. Real yields are inflation-adjusted yields: in this case, the US Treasury 10-year yield minus the core inflation rate. Why does this matter? Investing is all about asset allocation and risk-adjusted returns. On the risk-adjusted side, for example: if asset X has an expected return of 10% with a standard deviation of 8%, and asset Y has an expected return of 12% with a standard deviation of 15%, asset X is the superior choice given the risk trade-off.

On the asset allocation side, it’s about achieving required returns given the investor’s wants and needs. If inflation expectations are rapidly increasing, you would expect to see fixed income underperform: why would you want to have a fixed return when prices are increasing? On a real basis, your returns would be lower than otherwise intended.

Falling US real yields means that the spread between Treasury yields and inflation rates are decreasing, decreasing the penalty for holding a low yielding asset. If Gold yields nothing, has an estimated cost of carry of -2.4%, and only can return capital appreciation, it would best suited to rally when US real yields fell.

Accordingly, Gold is a desirable asset in a falling real yield environment, which is what we’ve been seeing develop over the past several weeks. The US 10-year real yield (Treasury yield minus core inflation) has fallen from 0.698% on July 7 to 0.411% today. This is a poor environment for the US Dollar to rally in, and as long as US real yields are dropping, Gold and the Japanese Yen can still outperform versus the US Dollar.

See the above video for technical considerations in the DXY Index, EUR/USD, GBP/USD, USD/JPY, GBP/JPY, EUR/GBP, the S&P 500, and Gold.

Read more: FX Markets Turns to Euro-Zone Inflation, Canadian GDP, US NFPs

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher's e-mail distribution list, please fill out this form

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

DISCLOSURES

News & Analysis at your fingertips.

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.