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BOND YIELDS AND DOLLAR BOUNCE

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Sometimes good news produces a bad effect. That's especially true when dealing with financial markets. Today's unemployment report dropped to 10% and payrolls fell by an unusually small amount. That good news was given a positive reception by most markets. By day's end, however, commodities and stocks were on the defensive. The good news caused a big jump in the 10-Year T-note Yield (Chart 1) as bond prices fell sharply. The jump in bond yields (and a more positive view on the U.S. economy) pushed the dollar higher. Chart 2 shows the Power Shares Dollar Bullish ETF (UUP) surging 1.5% on the heaviest volume in two months. The UUP is now challenging its 50-day moving average. Chart 3 shows the Euro (which trends in the opposite direction of the UUP) falling below its 50-day moving average for the first time in several months. The rising dollar caused profit-taking in commodities, and gold in particular.

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John Murphy
About the author: is the Chief Technical Analyst at StockCharts.com, a renowned author in the investment field and a former technical analyst for CNBC, and is considered the father of inter-market technical analysis. With over 40 years of market experience, he is the author of numerous popular works including “Technical Analysis of the Financial Markets” and “Trading with Intermarket Analysis”. Before joining StockCharts, John was the technical analyst for CNBC-TV for seven years on the popular show Tech Talk, and has authored three best-selling books on the subject: Technical Analysis of the Financial Markets, Trading with Intermarket Analysis and The Visual Investor. Learn More
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