Both 10-year T-note yields and the US Dollar Index strengthened for the week ended February 17 after posting weekly reversals two weeks earlier. Labor Department reports on consumer prices and producer prices in January recalled that retail prices are still a long way from the Federal Reserve’s 2% inflation target (DTN ProphetX chart)
10-YEAR T-NOTE RETURN:
After a three-month respite from the upward movement in interest rates, 10-year T-note rates rose from 3.74% to 3.83% for the week ended February 17, buoyed by January consumer and producer price hikes. Annual gains of 6.4% and 6.0%, respectively, were a stark reminder that gains are still a long way off the US Federal Reserve’s 2.0% inflation target and several more rate hikes are likely. Technically, after a three-month downward correction, interest rates saw a weekly trend reversal in the week ended February 3rd and have since risen, accompanied by an upward move in the weekly stochastic indicator. The uptrend in 10-year yields has continued in line with fundamental expectations.
US DOLLAR INDEX:
Similar to 10-year T-Note yields, the US Dollar Index experienced a correction in its uptrend, but the 12% correction was deeper and lasted four months instead of three. The US Dollar Index also had a weekly reversal two weeks ago and has been trading higher ever since, rising to 103.86 in the week ended February 17 from 103.63 Bullish reversal on the weekly Stochastic. Technically, prices are yet to clear the 104.00 resistance but the bullish change in momentum is a bearish source of concern for commodity prices in general.
CRUDE OIL:
April Crude Oil fell $3.37 in the week ended February 17 to close at $76.55 on Friday. In the last eight months, spot crude prices have fallen from over $120 a barrel to the mid-$70s, but only in the last month and a half have crude oil supplies picked up in response to an increase in domestic production. Ironically, while oil inventories have been increasing recently, spot prices have simultaneously established a support base above $70. In general, oil prices should be supported by the White House’s intentions to replenish the Strategic Oil Reserve if prices fall below $70. On the other hand, the recent inventory build is declining. Technically, crude oil prices have been trading in a sideways range between around $71 and $83 in April for three months and have not yet flipped into the next direction. A close above $83 would turn the trend up.
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The above comments are for educational purposes only and are not intended as specific trading recommendations. Buying and selling grain or grain futures or options involves significant risk and is not suitable for everyone.
Dana Mantini can be reached at [email protected]
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