U.S. Treasury Yield Surge Sends Shockwaves Through Markets
The market has been engulfed in turmoil this week, with the 10-year U.S. Treasury yield at the centre of the storm, signalling that borrowing costs in the U.S. are set to remain high. This has reignited fears of a recession, as Federal Reserve officials indicate that interest rates will remain elevated for an extended period.?
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The market has experienced significant volatility throughout the week, driven by the surge in the U.S. 10-year Treasury yield, a key figure in the world of finance, which reached 4.8%, its highest level since the 2008 Great Recession. While bond yields have been on the rise since July, and stocks have given up a significant portion of their gains for the year, the recent uptick has been further exacerbated by indications from Federal Reserve officials that they are inclined to maintain high-interest rates for a longer duration than previously expected. This development has not only impacted the bond market but has also bolstered the U.S. dollar, resulting in the EUR trading at its lowest level in 2023, at $1.0448.?
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Recently, the JOLTs job openings report in the U.S. revealed that the job market in the American economy remains tight. This is a critical factor that the Federal Reserve will consider when assessing whether there should be additional interest rate hikes in the final two monetary policy meetings of the year. One noteworthy point is that the U.S. stands out as the only developed economy demonstrating resilience, with decreasing inflation levels and elevated interest rates, making it an appealing market for investors. However, a lingering question remains as to whether the U.S. can manage a soft landing or if the recent surge in yields foreshadows a potential recession in 2024.?
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Consequently, the U.S. dollar has responded by reaching new highs and pushing the Euro to lower levels. After peaking at $1.1274 in mid-July, coinciding with the commencement of the rise in U.S. yields, the EURUSD has entered a bearish trend, shedding more than 7% of its value and hitting its lowest price on Tuesday, October 3rd, at $1.0448. During this period, the market experienced an oversold condition that lasted for two days. The three exponential moving averages present the nearest support and resistance levels for the EURUSD, at $1.0545, $1.0604, and $1.0744, respectively, with the short-term exponential moving average serving as the most immediate support. Beyond that, the next level of support is at $1.0358.?
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice.
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