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German Bund Yields Fall Below -0.50; Highly Correlated with EUR/JPY in Short-Term

The current correlation coefficient between German Bund Yields and EUR/JPY on a 240-minute timeframe is +0.94!

There has been a lot of talk lately about the drop in US 10-year yields, moving from 1.7742 on March 30th, down to today’s lows near 1.1320.  However, this move has not even reached a 50% retracement from the March 2020 lows to the recent highs, which is at 1.0566.

Source: Tradingview, Stone X

Compare this to the move in the German 10-year Bund yields.  Price reached a recent high of -0.0771 on May 19th, and today broke aggressively through the 50% retracement level from the March 2020 lows to the May 19th highs, at -0.4926, as well as the psychological round number support level of -0.5000.  Bund yields traded at their lowest level today since February 2nd.  As why shouldn’t they be?  The ECB has said nothing to indicate that they will taper soon, indicating that they will ignore transitory inflation and continue to purchase bonds at a higher pace than earlier in the year.  The next support level isn’t until -0.5660, so Bund yields still may have some room to go before pausing.  Below there is the 61.8% Fibonacci retracement level from the previously mentioned timeframe at -0.5906.  However, notice though that the RSI is in oversold territory, indicating the possibility of a short-term bounce. Resistance is at today’s highs near -0.4770.  (As of the time this article was published, Bunds have moved higher and if they close near -0.4770 will have formed a nice hammer doji, indicative of a reversal).

Source: Tradingview, Stone X

As opposed to the daily correlation between US 10-year yields and USD/JPY, which has a correlation coefficient of +0.82, the correlation coefficient between German Bunds and EUR/JPY on the daily timeframe is only +0.50.  However, on a