After the growth of the short position (against the background of the growth of open interest) in December 2017, the bond rate fell sharply and stopped. On this drop, the commercial began to buy sharply (the growth of open ineterset confirms this).
It is possible to update the minimum bond price to the support №1 or to support №2, after which the price will go up.
Another series of intermarket analysis …
Today we will focus on what is the cause of all the movements in the market cause the overflow of big money … interest rates and currency (US dollar).
Interest rates (important to change them) determine the value of money. Below are two charts: the yield of 10 year US bonds and the currency pair EUR/USD.
Growth rates leads to an increase in the national currency, the fall – a fall.
The image below clearly shows this relationship, but with a slight delay, ie, large capital needs more time to redistribute, as it takes time to the banking sector (the supplier of cash in the form of loans) to respond to the change in interest rates.
- growth rates up to 2007 led to a rise in the dollar (falling of pair EUR / USD) in 2008;
- growth rates in 2009 and early 2011 led to an increase in the dollar in 2010, and since mid-2011, respectively;
- increase in interest rates resulted in a rise in the dollar by the end of 2013 in 2014 (coinciding with the fall of the ruble by 50%);
- growth rates at the end of 2016 and the stabilization of this year could lead to a subsequent increase in the dollar (the same as the payment of dollar liabilities that will need to pay in dollars, thereby selling the national currency (in this case, in rubles), and coincides with the end of the year, “New Year’s rally”).
The analysis is not so difficult, but it is very important to start the analysis of the world situation from the outset.
Next will be more interesting …
- E-mini SP500 (/ES);
- 30-year US Bond (/ZB);
- Gold (/GC);
- Bonds yield (TNX, TYX, FVX);
- Crude oil (/CL).
The comment will be later…