Bonds, DXY and Indices correlation
In this article, we will analyze the correlation between the DXY, Bonds and Stock market Indices
On the Weekly DXY chart, we can see that the instrument is reaching the strong long-term upside support zone 95-96. This zone should provide solid support for the upside continuation. We should at least expect one more retest of the 98 level high.
Correlation between DXY and DJIA Industrial has become inverted and negative, indicating that the bounce from 96 level will lead to another leg lower in stock markets. Basically, this will be a usual safe haven flight into the USD across the market. Latest FED rate cut bets are already “priced in” the market so we could have a risk-off sentiment prevailing.
That risk-off sentiment conclusion is coming also from the US 30Yr T-bonds. Prices of the bonds are going up, so there is a relocation of the money flowing from the stock markets into the bonds also pushing the yields lower. Looking at the daily chart of the US 30Yr we can see a consolidation triangle above an important 152 level and increasingly possible continuation higher into 160.
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Learn to find high probability entry trade entry points with stop loss and take profit levels in 5 minutesOne of the most obvious negative divergencies recently is between Gold and SPX. Here also the DXY is coming into the equation, meaning the strength of correlation which will prevail. The possible incoming weakness continuation in stock markets is also being confirmed by the Gold appreciation which could be slowed down with the USD strength but pushed up again and above 1340 with SPX weakness.
