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UST Rising Yields Send USD Higher Weighing Down On The Risk Appetite

Published 02/21/2018, 02:56 AM
Updated 03/09/2019, 08:30 AM

The markets focusing increased again on the UST yields and their impacts of the global equities markets, after US started this week selling of UST worth $258b.

Yesterday, there were 4 auctions to underscore the current higher prospects of watching higher interest rate in US, as inflation is rising and the economy is expanding by higher rates fueled by adopting $1.5 trillion in tax cuts to take effect this year.

After ending the previous auction last Jan. 23 at 2.066%, UST 2-Year ended yesterday's auction with a 2.255% yield which is the highest since the credit crisis in 2008.

The yield from US 6-Month Bill Auction ended to rising to 1.82% from 1.785% on Feb. 12, US 3-Month Bill Auction ended to 1.63% yield from 1.57% and even The Auction of US 4-Week Bill ended at 1.38% from 1.36% a week earlier.

After the American equities recovery last week, The US blue chips ended their first session of the week yesterday down, as did the Japanese Nikkei 225 today, despite USD strength versus the yen on the interest rate outlook differential between US and Japan. USD/JPY is trading now near 107.80.

Under the pressure of the USD strength, EUR/USD retreated for trading now near 1.2320 ahead of the preliminary releases of EU PMI indexes of the manufacturing sector and service sector for February today which are expected to highlight the current synchronized global growth following the US which raised the interest rate outlook and the governmental yields curves globally.

The greenback which has been boosted by higher UST yields dragged gold, which has no yield, down to $1325 per ounce during the Asian session, despite the risk aversion which contained the market sentiment.

While the markets are waiting later today for the release of the recent FOMC meeting minutes which was the last under Yellen's leadership, Jan. 30 and 31.

XAU/USD Daily Chart

XAU/USD retreated for trading now near $1325 per ounce, after forming lower high last Friday at $1361.70 below its formed peak on last Jan. 25 at $1366.06.

XAU/USD maintained existence above $1300 psychological level by forming a bottom between these 2 highs at $1307.05 on Feb. 8

The rebound from that bottom helped XAU/USD to be trading now in its sixth day of being above its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today $1318.75.

Despite easing down to the current level, XAU/USD is still keeping existence above its daily SMA50, its daily SMA100 and its daily SMA200.

XAU/USD daily RSI-14 is referring now to existence in a lower place inside its neutral area reading 48.040.

XAU/USD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is having now its main line inside its neutral territory at 33.557 leading to the downside its signal line which is higher in the same territory at 54.079, after topping inside the its overbought region above 80.

Important levels: Daily SMA50 at $1316, Daily SMA100 at $1297 and Daily SMA200 at $1284

The nearest S&R:

S1: $1307.05

S2: $1250.49

S3: $1236.51

R1: $1361.70

R2: $1366.06

R3: $1375.20

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