CPI & FED Rates – The US Dollar Trade (Part 2): US 10-Year Yields in Focus
- John Nwatu MSTA CFTe
- Sep 17
- 2 min read
📦 Quick Overview
📊 Theme: Bond yields, Fed rate policy, and technical structure
🧠 Macro Signal: Market is leaning toward a Fed cut — how will yields respond?
📉 Scenarios: 3.8% or 4.6% breakout — two key paths
Market Sentiment: Dollar Weakness and Fed Cut Expectations
There’s a growing consensus in the market that the Fed is nearing a rate cut, with CPI data flattening and USD showing signs of structural weakness.
But what does this mean for US 10-year Treasury yields, which have been rising since 2020 and range-bound for the past two years?
Depending on how the Fed moves — and how markets interpret that move — we may be on the verge of a major breakout or breakdown in yields.
Scenario 1: Bearish Reversal Toward 3%
In this scenario, we’re watching for a drop in yields toward the 3.0–3.5% zone. Key elements include:
A visible head and shoulders pattern forming — typically a reversal signal
Price currently sitting below both the 50- and 100-week EMAs
However, in a sideways market, moving averages have limited reliability — horizontal levels and pattern breakouts carry more weight
If yields do break lower:
The 3.5% to 3% level becomes a key support zone
This would likely coincide with a rate cut, USD weakness, and continued risk-on sentiment (e.g., gold strength, equities up)
From a medium-to-long term view, this could simply be a major degree correction, with the broader uptrend eventually resuming.
Scenario 2: Bullish Continuation Toward 4.5–5%
On the flip side, yields may be coiling for a breakout. Price is still above the 200- and 250-week EMAs, which supports a long-term bullish bias.
Technically:
The chart shows a triangle pattern, often a continuation setup in an uptrend
A break above the 4.63% level would invalidate the head & shoulders and support the bullish case
If price respects the dashed trendline support, momentum could return quickly
A move toward 4.5–5% would likely indicate:
The Fed is holding rates longer than expected
The market is repricing inflation risk or growth acceleration
This could pressure risk-on assets and reverse the current gold + equity rally
Watching Out For the Break
As with the US Dollar Index (DXY), this is a “wait-for-structure” setup.
Short-term: Stay flexible and let the chart lead
Key levels: 4.63% (bullish trigger) and 3.8% (bearish trigger)
Long-term view: As long as yields remain above the 200–250 EMAs, the macro structure supports further upside
Final Word
The 10-year yield is coiled in a critical range. Whether it breaks toward 3% or 5%, the move will be significant — not just for bonds, but for every asset class connected to the USD and interest rate narrative.
This is less about prediction, more about positioning around levels and letting the macro structure confirm the next major trend.
Happy trading and investing!! If you like the analysis subscribe to Trends x Waves — for clean, signal-driven technical insights.
Comments