US10 YR, EUR/USD, GBP/USD and AUD/USD Forecast – Risk Appetite Struggling on Tuesday

US 10 YR Yield Technical Analysis

The first chart I have in front of you is the 10-year yield in the United States. This chart suggests to me, at the moment at least, that we are going to threaten the 4% level. This is an amalgamation of a couple of different things. It is a bit of concern when it comes to the fact that inflation is cooling, so people are starting to bet that the Fed will cut rates. That is bad for the dollar, at least in theory.

But it can also be read as a little bit of fear. I think that fear is probably the main thing here because while the yields are dropping, we are also seeing the stock market, at least in pre-market trading, look a little soft in America. I will switch over here to the currency markets, keeping in mind that the 4% level could cause a bit of a bounce.

EUR/USD Technical Analysis

The Euro is sliding against the US dollar. I think this is our first clue that some of those yields dropping might be a run to safety. It is not necessarily so much about the Fed cutting because just because the Fed cuts rates does not mean markets have to go higher. They can and quite often do go lower because people become concerned. What does the Fed see? When I look at the Euro, I still pay close attention to the 50-day EMA. If we close below there on a daily chart, I think we could drop to the 200-day EMA pretty quickly. A bounce and a rally from here are still very much a real possibility with 1.18 offering support.

GBP/USD Technical Analysis

The British pound has fallen pretty significantly, and this has something to do with employment numbers in the UK or jobless claims being higher than anticipated. The 50-day EMA is being challenged. The 1.35 level could be challenged. If we break down below there, then I think we go looking for the 200-day EMA, which is about 150 pips below there. Breaking that changes the entire trend, and it changes the entire outlook. Britain does have quite a few economic numbers coming out this week, so this could get reversed very quickly. Keep an eye on 1.35.

AUD/USD Technical Analysis

In the Australian dollar, I am watching this thing roll over a little bit and that does suggest maybe what we are seeing again is risk-off behavior. It is not necessarily dollar strength just because the dollar is suddenly loved. I think people are a little worried about a few things. It is worth noting that dollar shorts are at a 14-year high. That is generally when you see the market start to turn in the other direction, when everybody is in the same trade.

This pair will be different, though, because the RBA is likely to raise rates again. That is divergent from most other central banks, including the two previous ones mentioned. At 0.6950, I start to look for a bounce and try to take advantage of that, and it is really not a pair I plan on shorting, regardless. If we start to see the US dollar take off, then I will short the Euro, or I will short the pound. The Aussie would be the outlier. Watch this; if this breaks down, that is going to be horrific for the other two.

You can use all of these charts in congruence today to get an idea as to how the stock market may behave. If we start to see the US dollar sell off a bit, then you start to look for more risk-on behavior in places like the Nasdaq or even the gold market. It all ties together.