FX.co ★ Global macro overview for 16/05/2018

The main topic of discussion among investors is the sale of US bonds, which again drives the dollar higher and brings a breach of important technical levels. Yesterday's report on retail sales from the US was not impressive, but it was enough for the pretext to buy the dollar. Today in the morning, the yield on 10-year Treasury bonds stabilizes at 3.06%, but an important barrier is 3.03-3.05% has already been broken and the highs unsaw since 2011 are being corrected. The entire US yield curve has been trading at levels unseen for 7 or even 10 years. The difference in market interest rates is currently the main driver of changes for the currency market and the US is victorious out of the rest of the world. The sentiment failed to spoil a report from North Korea, which is dissatisfied with the ongoing military maneuvers of South Korea and the US, and therefore canceled today's talks with its southern neighbor. North Korea is haunted that it will never establish economic relations with the US in exchange for a complete disruption of the nuclear program and threatens that the June 12th summit of Kim Jong Una with Donald Trump may not be implemented. The fact that the financial markets noiselessly absorbed this information shows the general lack of interest in the situation and is another proof that geopolitical tensions have become for unimportant investors.

Increase in profitability will affect some pairs more strongly than others. The USD/JPY pair is the obvious choice for the global investors, so let's now take a look at the USD/JPY technical picture at the H4 time frame. The market has neglected the Double Top technical formation as it broke through the highs at the level of 110.03. The price remains inside of the uprising parallel channel, which indicates another high on the horizon. The latest one was made at the level of 110.43 and that might not be the end as there is no divergence between the price and the momentum oscillator. The higher the 10-year US Treasury bonds move, the higher the USD/JPY will follow, so the outlook remains bullish.