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Using the spread between 30 year and 2 year US Treasury yields, we
can gauge when policy makers are in control of market participants’
perceptions and when they are losing control to the free market’s will.
Operation Twist was announced in September of 2011 in the aftermath
of the first phase of the Euro crisis as the yield curve had exploded
higher, taking the monetary stress barometer, gold, with it. Over
bought on unbridled momentum, gold entered an extended correction in
line with the yield curve, which complied with policy makers’ goal of
calming down the system. As shown many times in the past, gold and the
30-2 yield curve generally travel together.
At the time of writing this post intraday on Friday, the AUD/CAD forex pair is down 0.0066 pips and is below parity, as
shown on the Weekly chart below. The 1.00 level is, essentially
the neckline of a Head & Shoulders pattern, and is an important level. A weekly close below could, ultimately, send it down by a measured move
of 700 pips to 0.93.
Any further weakness may signal further
problems in China, so it's one I'll be monitoring into next week, along with
commodities, which are also down today.
Strawberry Blonde's DISCLAIMER: The
information contained within my posts may not be construed as financial or
trading advice. Please do your own due diligence before engaging in any trading