US05Y-EU05Y EURUSD, just went long $FXE

dieseldub Updated   
TVC:EU05Y   EU 5Y yield
My two most recent posts were identifying a potential upcoming trade idea behind Euro bouncing back vs. USD soon, the chart today has made it looked more prime for reversal, finding ever increasing support, and slightly weakening 5 year yields in both Euro and U.S.. The difference between the two looks like it may start to contract a little in the coming weeks as well, which should send Euro higher.

As a slight update to my previous post linked at the bottom, I've updated that chart to include the EU05Y and US05Y yields on the same scale, and the difference between the two (US05Y-EU05Y) on a different scale on the left. It gives a little more complete picture that may help pick out the longer term trend shifts.

Zoomed in some on just the EURUSD, seeing how it's seemingly bottomed out, finding support here, and attempted a sharp rally this morning that was equally sharply rejected, but seems like this it's found support again and the trend for the coming weeks may well be a reversal to the upside for the Euro.

On the 5 year bonds side of things, both have set slightly lower highs than last week, with there being a bigger drop for the US 5 year than the Euro. Possible we're seeing a slow down of those yields going higher, with the US possibly losing a little more yield than the Euro. Seems prime for a reversal after more than a month and a half of the Euro sliding.

With that in mind, I did go long some FXE 20 Oct 23 101 strike calls this morning. A little risky and out of the money with some time left, but if this rallies as I hope it will, the payoff should be pretty nice. Trading price at the time of trade was about $98.81. Ask side was 0.30. Contracts in the money at the moment trade for more than 1.00.
Last night, I tried comparing the 3 year yields and that brought some interesting results.

It started to pick itself off the mat faster than the 2 year, and the divergences were maybe a little more helpful in pinpointing the Fall 2022 turn around. Instead of two successive higher lows, there was only one higher low as Euro found bottom.

The U.S. bonds, especially 2 year and higher, have had every climbing yields, pretty aggressively, in recent weeks. Treasury must be just unloading bonds and notes like crazy.

Suppose it makes some sense. with the shorter term notes and bills keeping yields high and not really coming down at all in recent months, the only way to uninvert with the current regime is for longer term notes and bonds to have their yields come up to meet them, it seems.

So, I was definitely way too early in predicting a Euro turnaround. But, even the ( US03Y - EU03Y ) is not setting a new high while Euro finds new lows, this might be the start of a divergence signal that a reversal is ahead, it's just getting the timing down that's of course a challenge... But there are signs that we're getting closer to the reversal.

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