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US AM Digest: USD Surges as 10yr Treasury Yield Hits Highest Level Since 2011

US AM Digest: USD Surges as 10yr Treasury Yield Hits Highest Level Since 2011

Justin McQueen, Strategist

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US Market Snapshot via IG: DJIA -0.55%, Nasdaq 100 -0.8%, S&P 500 -0.5%

Major Headlines

  • US 10yr Yield rises to higher level since 2011, supporting USD.
  • Oil prices hit fresh 3 ½ yr highs.
  • UK Jobs surge while wage data provides mixed signal

USD: The yield on the 10yr Treasury note rose above the closely watched 3% to hit its highest level since 2011. Subsequently, this pushed the USD through 93.00 with the rise in yields supported by expectations of upside inflation pressures as oil prices push to near 4yr highs. Additionally, the general positive retail sales data also help provide the greenback with an added lift, which is now hovering around session highs.

GBP: Back through 1.35 with GBPUSD looking at testing last week’s low at 1.3457. The move has primarily been on the stronger greenback throughout the session. Today’s UK employment report offered little in the way of support with the market focused wage data printing in line with expectations, encouragingly, real earnings (Wages minus Inflation) remains positive for a second consecutive month at 0.4%. However, more encouraging data will be needed for the Bank of England to strongly consider a summer rate hike.

EUR: The Euro making a run in on the YTD low residing at 1.1823. Eurostat confirmed that Eurozone GDP for the first quarter of 2018, while industrial production figures missed estimates. However, this is unlikely to cause a significant rethink in regard to ECB monetary policy path with the central bank looking to exit from its QE program later this year.

DailyFX Economic Calendar: Tuesday, May 15, 2018 – North American Releases

DailyFX Webinar Calendar: Tuesday, May 15, 2018

IG Client Sentiment Index: US Oil Chart of the Day

Oil - US Crude: Data shows 45.8% of traders are net-long with the ratio of traders short to long at 1.18 to 1. In fact, traders have remained net-short since Apr 09 when Oil - US Crude traded near 6312.4; price has moved 13.5% higher since then. The number of traders net-long is 3.9% higher than yesterday and 25.2% higher from last week, while the number of traders net-short is 8.2% lower than yesterday and 2.0% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Oil - US Crude prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current Oil - US Crude price trend may soon reverse lower despite the fact traders remain net-short.

Five Things Traders are Reading

  1. USDJPY Rallies Above 110.20 Following Upward Revisions to Retail Salesby Dylan Jusino, Analyst
  2. Trading Outlook for Gold Price, Crude Oil, DAX, S&P 500, and More” by Paul Robinson, Market Analyst
  3. Market Sentiment Improves But Still Held Back By Concerns About Trade” by Martin Essex, MSTA, Analyst and Editor
  4. EURUSD Brushes Off Slowing Eurozone Growth” by Justin McQueen, Market Analyst
  5. EURUSD Low to be Retested as US Treasury Yields Jump” by Nick Cawley, Market Analyst

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--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Follow Justin on Twitter @JMcQueenFX

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