I get it. It’s midweek and you are feeling exhausted already. But hold on for a minute before jumping into a cup of Chardonnay, check this out: the yield of the benchmark 10-year Treasury note reached 3 percent in the previous session, a level not seen since January 2014.

Gary Pollack, head of fixed-income trading at Deutsche Bank Private Wealth Management, said the 3 percent rate is seen a psychological level for investors.

A major bond player went a step further Monday, reassuring a break above 3 percent might open the doors to an upward extension as traders’ confidence is likely to be boosted by news.

I see… you have no clue of how that actually impacts your Forex trading portfolio. Don’t worry, you are not alone. In fact, many traders operate without knowing what’s the role of Treasury bond yields and how it relates to their prefered currency pairs. So let’s figure that out together:

Treasury bond yields are closely monitored by market players for multiple reasons. The rates on the bonds are paid by the US government for borrowing money, a similar idea of an interest.

So… Why is the 10-year treasury yield relevant?

The importance of the 10-year treasury bond yield relies on its use, rather than on its value. This yield is used as a barometer for mortgage rates and other financial instruments.

Bond yields have been rising since the beginning of 2018, but the analysis of such move presented two very different interpretations. For some market participants, the increase in yields outlines a higher confidence in the economy and the current administration.

However, others believe the rise in yields is a merely reaction to Federal Reserve’s plan to continue with monetary policy adjustments, especially interest rate hikes. This group also warns about negative effects of higher borrowing costs in the country.

US bonds are sold at auction by the US government. Bonds are instruments used by governments to finance themselves.

Dynamics:

10-year US Treasury yields go up when investors’ confidence rises

10-year US Treasury yields go down when investors’ confidence drops

10-year US Treasury yields go up when safe-haven assets demand increases

10-year US Treasury yields go down when safe-haven assets demand decreases

FortFS

GOLD

Gold futures traded lower in Asian hours on Wednesday, amid an empty economic front and as traders turn to the dollar’s dynamic in search for direction.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.59 percent at $1.325.10 a troy ounce as of 08:30 GMT.

The yellow metal settled in green territory on Tuesday, snapping a four-session losing streak as the rally in US treasury yields stopped, easing support for the dollar.

The US dollar index, which gauges the greenback against six major competitors, was trading 0.33 percent higher at 90.84 by the time of this writing.

The dollar-denominated metal is sensitive to moves in the greenback. A softer dollar makes the yellow metal more attractive for market participants holding foreign currencies.

The 10-year US treasury yield reached 3 percent, a level not seen since the beginnings of 2014. However, rates rebounded and moved back below the psychological level.

Higher bond yields can be interpreted as a vote of confidence in the economy. Usually, rising bond yields are accompanied by falling gold prices as demand for safe-havens decreases.

Analysts pointed out bond yields are reacting on expectations for further monetary policy normalization measures, particularly interest rate hikes scheduled later this year.

Gold gains were capped by an upbeat geopolitical context as positive developments were made over the US-China trade conflict. President Donald Trump emphasized that “China’s very serious, and we’re very serious,” adding that Treasury Secretary Steven Mnuchin will be part of delegation travelling to China. “We’ve got a very good chance at making a deal.”

On the data front, the Conference Board said consumer confidence for April came in at 128.7, surpassing expectations for 126.0 and a previous reading of 127.0. New home sales increased 4 percent in March to an annualized rate of 694,000 units. Also above analysts’ forecasts.

OIL

Oil futures were down in early trading hours on Wednesday, with market players looking ahead to official inventory data from the US Energy Department later in the day.

The US West Texas Intermediate crude contracts were down 0.09 percent to $67.64 per barrel as of 08:30 GMT. Meanwhile, Brent futures were 0.04 percent lower at $73.83 a barrel.

Crude benchmarks settled lower on Tuesday following hints that the US and France were close to reach an agreement to keep the Iran nuclear deal in place.

French President Emmanuel Macron proposed new terms that will keep Iran away from its nuclear activity until 2025, while putting an end to the country’s ballistic missile program.

News pushed some investors out of their long positions on crude as instability and expectations of output disruptions and cuts were keeping sentiment high in the last few sessions.

However, gains on crude were capped by rising expectations that the Organization of the Petroleum Exporting Countries will keep contributing to market rebalance in the near future.

In November 2016, OPEC and a group of non-OPEC producers led by Russia agreed to reduce output by 1.8 million barrels per day (bpd) to push down global inventories.

The US Energy Information Administration will publish its weekly report on crude and refined products as of 14:30 GMT. API and EIA reports can often differ.

FortFS

The dollar was trading 0.33 percent higher vs the Japanese yen at 109.17 as of 08:30 GMT on Wednesday, with the dollar taking a central role in the pair’s dynamic in relation to US T yields.

The 10-year US treasury yield reached 3 percent, a level not seen since the beginnings of 2014. However, rates rebounded and moved back below the psychological level.

The US dollar index, which gauges the greenback against six major competitors, was trading 0.33 percent higher at 90.84 by the time of this writing.

Higher bond yields can be interpreted as a vote of confidence in the economy. Usually, rising bond yields are accompanied by falling gold prices as demand for safe-havens decreases.

Analysts pointed out bond yields are reacting on expectations for further monetary policy normalization measures, particularly interest rate hikes scheduled later this year.

Gold gains were capped by an upbeat geopolitical context as positive developments were made over the US-China trade conflict. President Donald Trump emphasized that “China’s very serious, and we’re very serious,” adding that Treasury Secretary Steven Mnuchin will be part of delegation travelling to China. “We’ve got a very good chance at making a deal.”

On the data front, the Conference Board said consumer confidence for April came in at 128.7, surpassing expectations for 126.0 and a previous reading of 127.0. New home sales increased 4 percent in March to an annualized rate of 694,000 units. Also above analysts’ forecasts.

No relevant economic data is due for the day. Market players will keep an eye on bond yields, which could be affected by geopolitics and safe-haven demand.

FortFS

Asian equity markets were mostly lower on Wednesday, following a weak close in Wall Street on the back of interest rates expectations and concerns about the future of the economy.

In Japan, the Nikkei 225 lost 52.62 points or 0.24 percent to settle at 22,225.50 while the Topix index was down 2.02 points or 0.11 percent to 1,767.73.

Takeda Pharmaceutical was among worst performers of the day, with its stocks falling as much as seven percent as reports said the company rose its acquisition offer for Shire.

Seul’s Kospi benchmark ended 15.33 points, or 0.62 percent lower, at 2,448.81. Australia and New Zealand markets were closed for holidays.

Hong Kong's Hang Seng index eased 0.90 percent to finish at 30,362.00. In mainland China, the Shanghai composite fell 10.93 points, or 0.35 percent, to 3,118, while the Shenzhen Component dropped 0.09 percent to 10,547.10.

Analysts pointed out that the rally of US Treasury led to an increase in market volatility and added pressure in stock markets, not only in the United States.

The 10-year US treasury yield reached 3 percent in the previous session, a level not seen since January 2014. Higher bond yields are interpreted as a vote of confidence in the economy.

The US dollar index, which gauges the greenback against six major competitors, was trading 0.33 percent higher at 90.84 by the time of this writing.

President Donald Trump emphasized that “China’s very serious, and we’re very serious,” adding that Treasury Secretary Steven Mnuchin will be part of delegation travelling to China. “We’ve got a very good chance at making a deal.”

On the data front, the Conference Board said consumer confidence for April came in at 128.7, surpassing expectations for 126.0 and a previous reading of 127.0. New home sales increased 4 percent in March to an annualized rate of 694,000 units. Also above analysts’ forecasts.

Ahead today, the economic front looks empty, so we expect market players to focus on politics and currencies rather than data. The US Energy Information Administration will release its weekly report on crude and refined products inventories as of 14:30 GMT.

FortFS

No, we are NOT talking about drugs and this article has nothing to do with the 70’s. A synthetic cross currency pair refers to an artificial combination of currencies usually not available in the market.

If you are taking your first steps in the Forex market, then you are probably not going to invest huge money on it. And that is just fine, but keep in mind that starting out with a small balance could also limit your access to a wide range of trading instrument.

Nothing to worry about. Nowadays, Forex brokers offer a wide range of trading instruments, even for basic accounts. Newbies should try different pairs and find their prefered ones to work with.

The popularity of synthetic currency pairs is going down day by day. As brokers fight to survive in a competitive environment, their offers become more expansive. Not only EURUSD, GBPUSD and USDJPY are seen on screens, but also currency crosses like EURJPY or EURCAD.

Most traded currencies: US dollar (USD), Canadian dollar (CAD), euro (EUR), British pound (GBP), Swiss franc (CHF), New Zealand dollar (NZD), Australian dollar (AUD) and Japanese yen (JPY).

Cross currency pairs that come out them: USD/CAD, EUR/JPY, EUR/USD, EUR/CHF, USD/CHF, EUR/GBP, GBP/USD, AUD/CAD, NZD/USD, GBP/CHF, AUD/USD, GBP/JPY, USD/JPY, CHF/JPY, EUR/CAD, AUD/JPY, EUR/AUD, AUD/NZD.

DO you think these are enough? Well, for most of us they are, but still there cases where traders need artificial combinations that a broker will not include in its preset offering.

A synthetic currency pair should actually be seen as two currency pairs, with the US dollar taking the role of intermediary currency in operations.

Example: you want to trade EURJPY and the pair is not offered by your broker as a cross currency pair. What do you do? You have to find a common connection between both. Right, the dollar.

EURJPY: EURUSD + USDJPY

Buy EURJPY: Buy EUR Sell USD + Buy USD Sell JPY
Sell EURJPY: Sell EUR Buy USD + Sell USD Buy JPY

Operating a synthetic currency pair requires you to open two separate positions, which means doble cost for you plus the need to lock up unnecessary capital for margin requirements.

Recommendation: unless you are going BIG, then better stay safe using currency crosses and leave synthetics for financial institutions trading large volumes.

FortFS

GOLD

Gold futures were lower in Asian hours on Tuesday, with market players keeping an eye on geopolitics while awaiting for fresh economic reports.

On the Comex division of the New York Mercantile Exchange, gold futures were down 0.98 percent at $1.325.20 a troy ounce as of 07:20 GMT.

The yellow metal came under pressure on Monday as geopolitical tensions continued to ease and dollar strengthened further on the back of the increasing US bond yields.

The benchmark 10-Year US Treasury yield moved closer to three percent in the previous session, boosting demand for the greenback, which traded near to an eight-week high.

The US dollar index, which gauges the greenback against six major competitors, was trading 0.63 percent higher at 90.64 by the time of this writing.

Dollar-denominated gold is very sensitive to moves in the greenback. A stronger dollar makes the yellow metal more expensive for market players holding foreign currencies.

Market players also observed the US-China trade conflict, in which there hasn’t been major developments, rising expectations that both nations will find a peaceful solution.

The news front was also nurtured by prospects of positive talks between US President Donald Trump and the North Korean leader Kim Jong-un scheduled for this upcoming weekend.

Pyongyang has suspended their nuclear and ballistic missile tests until the meeting between leaders is concluded. Investors are hoping for a positive outcome, which could weigh on gold.

On the data front, the US manufacturing and services PMIs for April outperformed expectations at 56.5 and 54.4 respectively. Existing home sales grew 1.1 percent in March to 5.6 million units.

Ahead in today’s session, the S&P/CS HPI composite for February is up at 13:00 GMT, followed by CB consumer confidence for April and new home sales for March at 14:00 GMT.

OIL

Oil futures were mixed in early trading hours on Tuesday as participants prepared for fresh crude and refined inventories estimates later in the session.

The US West Texas Intermediate crude contracts were down 0.32 percent to $68.18 per barrel as of 07:20 GMT. Meanwhile, Brent futures were 0.19 percent higher at $74.20 a barrel.

Crude benchmarks settled in green territory on Monday as market players weighed comments from Iran over a potential extension of OPEC-led output cuts agreement.

Iran's oil minister Bijan Zanganeh said if oil prices continue to rise there will be no need to extend production cuts in the future.

"If the current oil price hike trend continues, there will be no necessity for extension of the OPEC agreement," Zanganeh said. "High oil price, even in the mid-term, works against OPEC interest by imposing volatility on the market and pressure on the price," he added.

Zanganeh also confirmed that Iran was exporting nearly 2.5 million barrels per day, which represents a 30 percent rise from March, according to news agency Bloomberg.

Market players are currently waiting the US to impose a fresh batch of sanctions against Iran for allegedly breaking terms of the multilateral nuclear agreement signed back in 2015.

“New Iranian sanctions in May would likely be the catalyst needed to encourage long-term buyers to revisit US E&P’s in a more serious way and could lead to materially higher oil prices, erase the backwardation in crude and provide a path for prices to stay elevated for quite some time,” explained Energy Specialist Leo Mariani.

Ahead in the day, traders will be looking at inventory estimates from the American Petroleum Institute for the week ended April 20.

FortFS

Asian equity indexes moved into green territory on Tuesday despite a weak lead from Wall Street on the back of higher Treasury yields and as traders await more economic reports.

Japan’s Nikkei 225 increased 0.95 percent, while the Korean Kospi index marked a 0.45 percent loss. Financials were among best performers for the day.

Meanwhile in Australia, the S&P/ASX 200 benchmark posted a 0.60 percent gain as most subindexes traded in green territory, with financials adding close to one percent in the session.

In mainland China, the Shanghai composite and the Shenzhen were up 1.91 percent and 1.81 percent respectively by the time of this writing. The Hang Seng traded 1.09 percent higher.

Wall Street top three indexes ended lower on Monday as Treasury yields settled dangerously close to three percent. The Dow Jones industrial average was down 14.25 points at 24,448.69, with Goldman Sachs leading decliners.

The benchmark 10-Year US Treasury yield rose up to 2.99 percent in the prior session, a level not seen since 2014. That move boosted demand for the greenback, which reacted with an increase to an eight-week high.

The US dollar index, which gauges the greenback against six major competitors, was trading 0.63 percent higher at 90.64 by the time of this writing.

The S&P 500 ended flat at 2,670.29, with technology losses being compensated by increases in telecommunications. The Nasdaq composite eased 0.3 percent to 7,128.60.

On the data front, the US manufacturing and services PMIs for April outperformed expectations at 56.5 and 54.4 respectively. Existing home sales grew 1.1 percent in March to 5.6 million units.

Economic calendar:

Europe: German business expectations, current assessment and lfo business climate index for April are all scheduled at 08:00 GMT, with readings of 104.4, 125.7 and 114.8 seen. CBI industrial trends orders for April in the UK will be released as of 10:00 GMT.

United States: the S&P/CS HPI composite for February is coming at 13:00 GMT, followed by CB consumer confidence for April and new home sales for March at 14:00 GMT.

FortFS