Treasuries Look To Continue Divergence With The Dollar

This past weekend I noted what has been something strange lately. US Treasuries were moving higher as the US dollar was pulling back. It turns out that this is not so unusual.

Digging deeper, the weekly ratio chart of the iShares Barclays 20+ Year Treasury Bond Fund (TLT) against the PowerShares DB US Dollar Index Bullish Fund (UUP) shows the period of strong correlation the last 12 months was preceded by a period of Treasury strength against the Dollar. This looks more like a long consolidation before another burst higher in relative strength. And it has the support of a rising and bullish Relative Strength Index (RSI) and a Moving Average Convergence Divergence indicator (MACD) that is about to cross to positive.

iShares Barclays 20+ Year Treasury Bond Fund,(TLT)/PowerShares DB US Dollar Index Bullish Fund (UUP) Weekly

A bull flag in the run higher would give it a target of about 6.60 on the ratio or 15% higher. And a check of the daily chart of that ratio shows the trend higher is now riding along the Median Line of the Andrew’s Pitchfork, ready to start back higher.

Should it continue to ride higher along that Median Line the target at 6.60 would be reached in about 6 months time. Remember that the ratio can move higher by a rise in Treasuries, a fall in the dollar, both or just by both moving in the same direction but with one moving faster than the other. Look at the pair, not just the pieces.

iShares Barclays 20+ Year Treasury Bond Fund (TLT)/PowerShares DB US Dollar Index Bullish Fund (UUP) Daily

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