I have put together a 30-minute EUR/USD (red, green) / 10-Year Bond Yield (blue) chart. US Bond yields traded to a 5.316% high following last week's much stronger-than-expected US Retail Sales, as EUR/USD simultaneously printed the 1.3261 low that morning. Those positioned ahead of the strong data covered positions following the report sending dollars lower and bonds higher (rates lower) in a classic buy the rumor, sell the fact scenario. Both EUR/USD and bond yields have traded directionally since then into critical technical levels. US 10-year rates have closed the 5.137% gap, and are moving into critical .618 retracement and measured move support at 5.10%. This level should contain sellers. We currently trade 5.123%. Similarly, EUR/USD just tested and failed at 1.3440 critical trendline resistance last night as we trade 1.3405.

For the rest of the week, I will expect US 10-year rates to remain above 5.10% on a daily closing bases.



Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

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