Market Anthropology: Macro’s One-way Street

Despite the incessant clarion calls by the deflationists that the dominant macro trade: long US dollar, long Treasuries and short oil – will extend indefinitely; the bend in the road in Q1 and the familiar patterned streetscapes, continue to point towards an approaching U-turn in this one-way street. 

Long-term Treasuries appear poised for a downside reversal – and are completing a similar descending topping pattern, evident in the two previous multi-year Treasury rallies. We maintain our expectations that the 10-year yield will challenge overhead resistance around 2.65 percent later this year and see the US dollar index following suit lower – which should provide an exit for commodities from the dead end street they’ve remained in since Q2 2011.