Trade Idea: For the past few weeks, US rate cut probabilities have gone down significantly based upon strong US economic data & elevated Q1CY24 CPI numbers. So financial markets are now only pricing less than 1.5 rate cuts in CY24. This had led to US yield curve moving up significantly with 10yr UST testing the crucial 4.65 levels this week. The up move in UST yields was exacerbated after strong March’s NFP & March’s CPI & Q1CY24 US GDP nos.
But this up move in UST yields has not been followed by a sustained uptick in DXY index. In fact, DXY after making a high of 106.25 on 16th April has consolidated to below 106 levels currently. This has been led mostly by both Euro & GBP stabilising around current levels of 1.07 & 1.25.
Hence, we recommend to short EURUSD and being long 10year UST simultaneously. It is a relative value macro trade & might take some time to play out.
So we recommend to Short 10 Mio EURUSD at 1.0695 & Long 10 Year UST for 10k DV at 4.67. Stop loss in absolute amount is -100,000 USD on the combined trade. Profit Target can be around +200,000 USD on the combined trade.
For detailed trade recommendation report, please read the below report in our trade recommendation section:
https://macro-spectrum.com/trade-recommendation/shorteurusd-long10yrust
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