US 2-Yr Consolidates With Neutral Fed Policy
The below is the daily chart of US 2-Yr. Treasury yield. The red shaded area is characteristic of a mark-down phase i.e. the yield was declining. The note now finds itself in a sideways consolidation (blue shaded area). Analysis of the 2-Yr. note is instructive because it is sensitive to the Fed’s monetary policy bias. We know that the Fed has moved away from a hawkish policy, which is reflected by the current consolidation. However, we note that the RSI is moving towards 50. If it crosses above this level and the green 5-day EMA crosses above the orange 10-day EMA it introduces a possibility that the market is expecting the Fed to revert back to a hawkish policy. This would be an interesting development and we continue to monitor.
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