US Indices Tumble as 10Yr Yields Above 3%, Dollar Steady

US Equities

US Indices dropped sharply on Tuesday as US treasury yields still rising to multiyear highs. The 10 year yield is hovering at the 3% level which is the highest since 2014. Dow Jones traded below 24000 for the first time in two weeks, while the SPX500 found support near the 200 day moving average. However, the CB consumer confidence which measures the consumer confidence in economic activity, is near 18 years high.


The Dollar index retraced some of its gains yesterday after rising for five consecutive days. The dollar is being supported by the rising bond yields which is confirming the divergence in the monetary policy expectations between US and its rivals. This divergence will increase the dollar inflows as the investors will be looking for good return on their investments. The economic figures coming out from US are still showing the strength of US economy. The housing market reports on Monday and Tuesday signaled that this market is back on the right track. New homes sales rose to the highest since early 2007.


The Euro found support near the 100 day exponential moving average, for the first time since late 2017, which helped in stopping the 3-days bleeding. The common currency dropped more than 200 pips in three days on soft economic data from Eurozone and divergence in the stance of the monetary policy between the European Central Bank and the Federal Reserve. The ECB meeting is due tomorrow, where bond markets price in a “No change in Policy”, the press conference of the President will be monitored closely for any tapering comments.


The Japanese Yen weakened to two months low against the US dollar, as the dollar is favored due to the rising yields, which confirms the different monetary policies between the United States and Japan. The spread between the US and Japan 10-year yields is the highest in 11 years. The Yen attracted some buyers as the stock market fell in the NY session. The Bank of Japan meeting is due on Friday, no change in monetary policy is expected.


Gold Prices rebounded from the 100 day exponential moving average and retraced some of its losses. Gold was favored after the drop in US indices and traded at a high of $1332. The support area between $1318 and $1323 held for three times in the past trading months. Gold prices were pressured recently by the strength of the US dollar and the easing geopolitical tensions.


Oil prices fell from late 2014 highs as investors are worried form the rise in supply and production in the United States. West Texas Intermediate tumbled almost two percent to trade at $67.50 per barrel. Oil Prices were supported for the past year by the output cut plan held by the OPEC, and the rising geopolitical tensions. The American Petroleum Institute (API) showed that the U.S. Crude oil inventories rose by 1.1 million barrels to 429.1 million in the week to April 20. The official data from the Energy Information Administration (EIA) due today.

The most important economic events:

GMT Country Event Expectation Previous
14:30 US Crude Oil Inventories -2.043 -1.071
20:15 CA BoC Gov Poloz Speaks    


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