Chapter 1 lesson 2 - Intro to the 10 year note to frame bias for DXY Flashcards
Why is the USD 10 year bond yield important?
If the price of a bond goes up the yield goes down. There is an inverse relationship between the bond price and the bond yield.
What is the relationship of the DXY to other currency pairs?
There’s an inverse relationship between the DXY and any currency pair where the quote currency is USD.
EG, Is DXY goes up, EURUSD will most likely go down.
How do you anticipate the DXY bias?
By looking at the USD 10 year bond yield.
NB, the yield of the bond is interest earned on a bond.
How does interest rates impact currency?
The greater the interest rate, the more valuable the currency is
What is the underlying mover of the forex markets?
Interest rates of currencies. A change in interest rate could result in a large move in the currency.
Where are interest rates derived form in the US economy?
From the bond yield.
If the bond yield goes down, interest rates will go down, and DXY will go down as well.
If the bond yield goes up, interest rates will go up, and DXY will go up as well.
Can the concepts be applied to other markets?
Markets always book the same way. Some are more clean than other because there’s more liquidity. If a market has low liquidity, it will book different to a market with high liquidity.
Markets with similar levels of liquidity will book in the same way.
How can we use the US 10 year bond yield to aid our DXY high time frame analysis?
If the US 10 year bond yield is drawing to liquidity or an inefficiency, we should expect the DXY to move in the same direction.
