U.S. stocks advanced above the $2,400 level, which maintains long-term trend signals. Meanwhile, the pace of U.S. economic growth is slowing as inflation and manufacturing data are weaker. Furthermore, employment and new orders are expanding at a slower pace this year. The U.S. Dollar and Treasury yields are sensitive to slowing macro conditions, while post-election euphoria continues for equities as investors reach for risk exposure.
This divergence confirms the base-case for hedging equity appreciation with gold and increased exposure outside of the U.S, particularly within the FX space as the Euro and British Pound complete a lengthly base accumulation.
Upside appears limited for the U.S. Dollar given the bearish cross of the 50-day moving average below the 200-day moving average. A declining trend this year is intact, which supported an overbought downturn in Treasury yields and a sustained bid for Gold. This underlying safety bid is connected to slowing macro conditions despite the broader risk-on trend in equities.
Finally, the U.S. election bond sell-off registered a familiar chart pattern seen during the "taper-tantrum" of 2014. A spike in Treasury yields also appears limited to a long-term declining trend line at the 2.60% level. The 10-year Treasury yield faces slowing momentum on the left monthly chart with more important support at 2.00%. However, on a weekly basis, the right panel chart shows near-term trend support around 2.30%.
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