INDEX:DXY U.S. Dollar Index
.....bond yields breakout. As you can see from the TNX chart in panel 2 of the chart above, despite the Fed's rate hike and attempt to move back to 'normalization', 10Y US yields still remain in a holding pattern. Therefore, one wonders if the USD is grossly overvalued at current levels and could be prone to a nasty selloff this year.
Hi Zeeshan. Thanks for commenting. What I am trying to say is that USD Bulls may have priced in way too much, way too quickly in terms of interest hikes from the FED. If we continue to have problems in emerging markets and Europe, then that may give the FED reason to pause the rate hikes, which, should lead to the unwinding of the USD longs. The fact that US 10Y yields (panel 2 of the chart above) has not broken out to the upside, means that bond traders do not share the FED's optimism about continued growth in the US. I think the USD Index will print a new high at some point in the first 2 quarters of 2016 and then we will see a big selloff, which will see the EURUSD rise. I hope that clears up any confusion. This and more matters are discussed LIVE in our London Trading Room session every day at www.tradinglegion.com . Many thanks and HAPPY PIPPIN!