We are currently seeing a significant divergence between EURUSD and TNOTE. Interestingly, a similar divergence took place at the end of April and closed right at the beginning of May. Today EURUSD, after reaching the 14-period average, is clearly rebounding towards the recent local highs, not reacting to the recent rise in bond yields. Interestingly, the 5 and 10-year TIPSs, i.e. bonds protecting against inflation, reached the last local highs from 2011-2013, indicating strong signals regarding the increase in consumer prices. Theoretically, this should lead to an increase in bond yields in the near term, in particular in response to tomorrow's CPI inflation data. Forecasts indicate a reading above 3%.
Significant divergence between EURUSD and TNOTE. Source: xStation5
