BofAML On Silver's Squeeze, The Lurching Loonie, & Treasury's Turning Trend

Tyler Durden's picture

US Treasury yields broke down sharply Friday, confirming a near-term, potentially medium-term, turn in trend; and, as BofAML's Macneil Curry notes, this Treasury turn should prove to be a headwind for select USD pairs, (although BofAML remains bigger picture USD bulls); particularly USDJPY. However, the weakness in the Canadian USD - which was the only currency not to rally against the greenback on Friday - suggests the downtrend in the Loonie has significant legs. Precious metals - most notably silver - could also benefit from the Treasury trend change.

Via BofAML's Macneil Curry,

US 5yr yields rollover

US Treasury yields have topped and turned trend, with 5yr yields doing so in particularly dramatic fashion. The bullish reversal from 4.5yr trendline support says 5yr yields should fall another 10bps/15bps in the In the sessions ahead, with worst case potential for a re-test of long term pivot resistance at 1.22%/1.25%.

$/¥ is topping out

With Treasury yields rolling over, $/¥ is set to do the same. A break of 103.74 would confirm the bearish turn in trend. While the Head & Shoulders Top targets the 102 area, CFTC positioning and the completing 5 wave advance from Feb’12 and Oct’13 says weakness can extend to the 200d (now 99.70) and below.

$/CAD: the exception to the rule

Friday saw the US $ fall against all major currencies EXCEPT THE CANADIAN $. Indeed, $/CAD has now reached levels not seen since 2009. While we could see a near term pause or correction, weekly charts say that this trend has significant room to run, with the multi-year Head and Shoulders base targeting 1.1666/1.1841

Silver squeeze

With the US Treasury market turning and the US $ near term vulnerable, precious metals should benefit. Silver is particularly worthy of note as a break of 20.51/20.62 resistance would complete a near term base and turn higher opening further gains towards the Oct-30 high at 23.09