US 10-YEAR YIELDS APPROACHES 3%, LOWEST LEVEL SINCE 2014
The Australian Dollar continued to slide after the country’s bureau of statistics released the quarterly consumer prices data. The data showed that the consumer prices rose by 0.4% in the quarter. This was lower than last quarter’s data of 0.6% and the 0.5% traders were expecting. On an annual basis, the CPI rose by 1.9%, lower than the 2.0% traders were expecting. The prices were mostly affected those of higher education and utilities. The data, coupled by the sluggish wage growth removes the urgency for the RBA to hike interest rates in the near future. YTD, the Australian dollar has fallen by about 2% against the dollar.
The euro was little moved after IFO released the business climate index. This index rates the country’s current business climate and measures the expectations for the next 6 months. The data showed that the index declined to 102.1, which is the lowest level since 2013. Analysts were expecting the index to fall to 102.8 from last month’s 103.3. Similarly, the data from Italy showed that the climate index fell to 107.7 from last month’s 108.9.
In the United States, the earnings season continued with upbeat results from major companies. Last evening, Alphabet released reported revenues of more than $23 billion. Today, Caterpillar, 3M, Coca-Cola, and Lockheed Martin all released results that beat the analysts’ expectations. These are the second earnings released following the tax cuts. As a result, all the major American indices opened higher with the Dow surging by more than 100 points. At the same time, the 10-year treasuries inched closer to the 3% market. They are now trading at 2.992%.
The EUR/USD pair continued to fall crossing the lowest level since March, 1. The downward movement came after a survey showed weakening business expectations in Germany, the biggest economy in Europe. It also fell as the US treasury yields continued to rise, with the 10-year approaching the 3% level. At this point however, the pair is at an important support level, meaning it might reverse. Traders should watch the 1.2150 level. They should also watch out for the treasuries market which could reach 3%, the lowest level since 2014.
The downward momentum started on Friday continued today after data from the bureau of statistics showed that inflation was not rising as fast as expected. The pair reached a multi-weekly low of 0.7577. On Friday, it had reached a high of 0.7813. At this point, traders should be cautious about entering short positions. The MACD and the RSI are showing signs that the pair might reverse. If it reverses, you should watch out for the 1.7665 level.
The Dow rose after Caterpillar and 3M released upbeat earnings. 3M released earnings of $2.5 per share in line with the expectations. It had revenues of $8.28 billion. Caterpillar on the other hand reported earnings of $2.82 per share and revenues of $12.9 billion. While the index might continue moving up, traders should pay close attention to the treasuries. If the 10-year yields reach 3%, it will be the lowest level since 2014, which could be problematic.