Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Cross Asset Strategy

In a note titled <a href="https://www.smartkarma.com/insights/bonds-all-charts-lead-to-me" target="_blank" data-smartkarma-citation="insights:52482" rel="noopener">Bonds: All Charts Lead to Me</a> on 3 June 2021, it was suggested that US 30 year yield would make it to 1.90%-1.92% area.That target has now been met. However, fresh developments must be taken into account while trying to determine what happens next.

In a note titled Bonds: All Charts Lead to Me on 3 June 2021, it was suggested that US 30 year yield would make it to 1.90%-1.92% area.That target has now been met. However, fresh developments must be taken into account while trying to determine what happens next.

The picture on the Dow Jones Industrials Average is unfolding in a manner that is still similar to that seen a year after the last major crisis almost a decade ago - and it is troublesome in the short run.One way or another, in whichever strange ways, history has a way of somehow reflecting it’s previous shades. A year after the lows, the stock market today is once again showing signs of short term vulnerability as it did in 2010, a year after the stock market low of March 2009.Perhaps the leading signs are seen on the Dow Transportation Average which has already declined notably since the first half of May. Any lower on either the Transports or the Industrials would amount to significant bearish breaks that would argue for 6%-9% declines from current levels depending on which average we choose to look at.Perhaps it was bad timing for the Fed to be hawkish this month. Or this is a reaction to the Fed’s hawkishness itself. Either way, should this bearish picture on the Dow, as well as the bearish ones in most commodity markets, unfold, expect the Fed to “back track” on some of its recent messages.

The picture on the Dow Jones Industrials Average is unfolding in a manner that is still similar to that seen a year after the last major crisis almost a decade ago - and it is troublesome in the short run.One way or another, in whichever strange ways, history has a way of somehow reflecting it’s previous shades. A year after the lows, the stock market today is once again showing signs of short term vulnerability as it did in 2010, a year after the stock market low of March 2009.Perhaps the leading signs are seen on the Dow Transportation Average which has already declined notably since the first half of May. Any lower on either the Transports or the Industrials would amount to significant bearish breaks that would argue for 6%-9% declines from current levels depending on which average we choose to look at.Perhaps it was bad timing for the Fed to be hawkish this month. Or this is a reaction to the Fed’s hawkishness itself. Either way, should this bearish picture on the Dow, as well as the bearish ones in most commodity markets, unfold, expect the Fed to “back track” on some of its recent messages.

Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

While our base case is not one of significant dollar strengthening, we need to be cognizant of the risk. As such, we evaluate which currencies are the most vulnerable if we get a repeat of the Q1 dollar appreciation and EM FX sell-off on the back of higher US Treasury yields.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

While our base case is not one of significant dollar strengthening, we need to be cognizant of the risk. As such, we evaluate which currencies are the most vulnerable if we get a repeat of the Q1 dollar appreciation and EM FX sell-off on the back of higher US Treasury yields.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: Which Currencies Are Most Vulnerable to Dollar Strengthening?

EM FX volatility has dropped to its lowest level since the start of pandemic, which is likely leading to a positive scenario for currencies. In this note, we highlight the currencies most likely to benefit in such an environment.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

EM FX volatility has dropped to its lowest level since the start of pandemic, which is likely leading to a positive scenario for currencies. In this note, we highlight the currencies most likely to benefit in such an environment.Separately, the attached file is a snapshot of the EM currency market in which we seek to identify the leaders and laggards among currencies by comparing the performance of each to its history as well as to other currencies based on their respective betas to an EM currency index.

FX Dashboard: Declining EM FX Volatility Foreshadows a Positive Environment

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

US Treasury (10 Yr Generic) / Technical Analysis

US 10yr yield bear call in March is nearing our key downside target that was at 1.35% and now raised to 1.37% given the time translation rise in trendline support. DXY has held lows and needs to push through 90.50/70 to challenge bigger resistance at 91.70/92.A break below 1.37% trendline support on a sustained basis would be a game changer for the yield trend (lower toward 1.20%) but more importantly would deflate USD support. We are betting trendline support initially holds and will help a tactical USD bounce cycle.Euro secondary failure at 1.22 is important.Risk red flags: AUD and NZD top caps and bear impulse raises risk red flags ahead of the late June risk turn cycle (weaker seasonality for US equities).

US 10yr yield bear call in March is nearing our key downside target that was at 1.35% and now raised to 1.37% given the time translation rise in trendline support. DXY has held lows and needs to push through 90.50/70 to challenge bigger resistance at 91.70/92.A break below 1.37% trendline support on a sustained basis would be a game changer for the yield trend (lower toward 1.20%) but more importantly would deflate USD support. We are betting trendline support initially holds and will help a tactical USD bounce cycle.Euro secondary failure at 1.22 is important.Risk red flags: AUD and NZD top caps and bear impulse raises risk red flags ahead of the late June risk turn cycle (weaker seasonality for US equities).

US 10yr Yield Support Will Define the USD

United States

The U.S. Dollar Index(USDX) indicates the general int'l value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. The ICE US computes this by using the rates supplied by some 500 banks. FOR REAL TIME SEE EIS ICEA<GO>.

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Dollar Index (DXY CURNCY)

US 30 Year Yield: Target Met, What Next?

The 1.92% target on US 30 year yield has been met. However in the context of recent market developments, there still appears to be the danger of...

Shyam Devani

US Equities: Dow Troubles

The Dow is in trouble whether looked at independently, with the Dow Transports, or taken from an historical trend perspective. Watch these levels...

Shyam Devani

FX Dashboard: Which Currencies Are Most Vulnerable to Dollar Strengthening?

We evaluate which currencies are the most vulnerable under the risk scenario of a repeat of the Q1 dollar appreciation and EM FX sell-off on the...

Gautam Jain, PhD, CFA

FX Dashboard: Declining EM FX Volatility Foreshadows a Positive Environment

With EM FX volatility dropping to its lowest level since the start of pandemic, we highlight the currencies most likely to benefit in the likely...

Gautam Jain, PhD, CFA

US 10yr Yield Support Will Define the USD

US 10yr yield bear call in March is nearing our key downside target near 1.37% trendline support. DXY has held lows and needs to push through 90.50...

Thomas Schroeder

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