Trading news

Bill Gross Calls Another Top in Bonds, Predicts End of Low Rates

Posted on May 5, 2015 16:09

Bond King Bill Gross is making another call that the 30 year-old US bond market bull run is coming to an end, and low rates will eventually rise. The trader has made these calls before, and the last one arguably lost him his job at PIMCO, since he called a top in bonds a few years ago betting that the Fed would tighten earlier than they actually did.

This time around there might be more reason to listen to his call because of the Federal Reserve’s insistence that they will raise rates before the end of this year, and ideally between June and September.

What It Means for Forex

Higher US interest rates (which is what would entail a “top” in the bond market) are supposed to translate into a higher US Dollar since the reward for holding USD goes up with as its base interest rate goes up.

But we have to contrast this dynamic with another currency, namely the Euro, to really see a result. Because against the Euro, the Dollar looks even more attractive, given that the interest rate situation in the European Union is still on a downward course.

The long-term prospect for EUR/USD is absolutely lower then, the question is at what rate will EUR/USD go down and which resistance levels can we expect to hold during this consolidation?

Daily chart of EUR/USD

We actually have the view that the top for EUR/USD is somewhere near the latest high at 1.1290, but there could be more upside until 1.1340.

The recent high was put in right at former support from January and February, and we think going into a sell-rally mode is best here unless there is a clean break of 1.1340.

The information provided is for educational purposes only and should not be considered as investment advice.


Monday, 25 May, 2015 / 11:59

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