Technically Speaking

U.S. Dollar Index:

The December U.S. Dollar Index closed up 1.73 points last week, ending at a new 2-month high of 94.68. From a fundamental view, Friday's new high is puzzling as the Federal Reserve recently committed to keeping the federal funds rate near zero for at least another two years -- a policy that is bearish for the dollar. Technically however, last week's rally turned the weekly stochastic higher, a bullish change of momentum, which suggests the 5-month downtrend that took prices to their lowest level in over two years may be over. We also note CFTC showed noncommercials holding 9,146 net-shorts as of Sept. 22, positions that are now under pressure to be bought back.

December Gold:

December gold fell $95.80 an ounce last week, finishing Friday at its 100-day average of $1,866.30. Gold prices have been trading higher for two years, most recently supported by economic damage from coronavirus and the Federal Reserve's need to keep monetary policy accommodative and interest rates near zero. Federal Reserve Chairman Jerome Powell's recent willingness to allow more inflation should also have been bullish for gold prices but, technically speaking, the outlook for prices looks bearish. December gold peaked at an all-time high of $2,089.20 on Aug. 7, 2020, and Friday's close was 11% lower. CFTC data showed noncommercials net-long 219,060 contracts of gold, a heavy bullish position that is now under pressure to liquidate as the weekly stochastic shows a bearish change in momentum.

Yield on 10-Year T-Note:

The yield on a U.S. 10-year Treasury note slipped from 0.69% last week to 0.66% Friday, a slight change lower. From a larger perspective, this same interest rate peaked at 3.25% back in October 2018 and slid to a low of 0.40% in March 2020 as selling picked up with increased market anxiety related to coronavirus. Since the March low, the interest rate has held sideways and the weekly stochastic shows the downward momentum was broken in August. With coronavirus concerns still restraining economic activity, it is difficult to expect higher interest rates, but the future direction of the 10-year T-note yield will offer important clues for how the economy is doing and where the U.S. Dollar Index is headed. For now, the 10-year yield trend is sideways.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.

Todd Hultman can be reached at Todd.Hultman@dtn.com

Follow him on Twitter @ToddHultman

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.

Dana Mantini can be reached at Dana.Mantini@dtn.com

Follow Dana on Twitter @mantini_r

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