The US 10 Year Yield, Brazilian Real, DAX, and Platinum: Ready to Move?

10-Year Yield

The first chart in front of you is the 10-year yield in the United States, which is dropping a bit early on Thursday. This is a good sign that maybe the carry trade is going to continue to be one that traders will follow. That is a little bit of foreshadowing there.

Notice how we had tested the 4.30% level and pulled back. If we continue to fall, and I think if we break below the 4.20% level, that will start to weaken the US dollar a bit again. That could send some of your exotic currencies a little bit higher. In fact, some of the carry trades that most traders out there in the retail space have been ignoring have been some of the best trading out there. So while I watch this, I start to think about the interest rate differential between the United States dollar and a whole host of currencies.

In this case, though, I think this yield dropping a bit probably pushes people into risk appetite-based assets.

USD/BRL

With that in mind, the first thing I am looking at is the US dollar against the Brazilian Real. There is a pretty significant support level right around 5.31 that will be watching. If we break that, the Real may strengthen, and we may drop to 5.05. Short-term pullbacks at this point in time, all the way back to the 5.45 level, offer selling opportunities at the first signs of exhaustion.

Keep in mind, Brazil does offer a 15% interest rate, so you get paid to be short of this market. It is a matter of throwing a little bit of your money from your portfolio into this and simply collecting the interest rate differential at the end of each session. That being said, you want to find value, so a bounce is a good thing.

DAX

If you have been watching these videos here at FX Empire, you know over the last several days I really kind of keyed in on the DAX and the CAC 40 in Paris. I think this is a situation where we are trying to recover, but there is a psychological barrier here in the DAX at the €25,000 level.

I would stress that we bounced from the 50-day EMA, and Germany is throwing a ton of money at stimulus and stimulative efforts this year and the next several. So, I do think that bodes well for the DAX in general. I like the price action. Now I want to see the DAX overcome this barrier because it is worth noting that we did gap higher, about 1.5% higher, and then have pulled back since. Not the end of the world, but we do at least see that the market recognizes that €25,000, of course, would be a place that you need to be cognizant of.

Platinum

Finally, the market that really has captured my attention over the last couple of days has been Platinum. Platinum continues to threaten the $2,600 level in the futures markets, and I think if we can break above there, that could open up another run, as we have seen in Silver.

I could make an argument pretty quickly, I believe, that it is a $600 move waiting to happen, bringing Platinum to $3,200 an ounce. We could see a lot of action as we did in Silver. Keep in mind, Platinum does tend to grind a bit more than Silver, but quite frankly, that is part of what makes it attractive. The heart palpitations are brought down to a minimum.

If we pull back, $2,200 ends up being support. But while everybody is watching Silver, Platinum is quietly making the same argument due to a lack of supply.