At yesterday’s Fed meeting, the FOMC kept interest rates unchanged. And this was not a unanimous vote. There were two dissenters.
We have one more Fed meeting later this year, so let’s take a look at the chart of the 10-year Treasury yield and get a sense of where things may be headed next.
Where Yields Stand After the Latest Fed Meeting
Here’s the daily chart of $TNX.X, which takes the 10-year Treasury yield and multiplies it by 10.
The yellow vertical lines mark recent Fed meetings, with the blue line showing the start of our new Fed Chair Kevin Warsh’s term. The green line marks the upcoming December meeting.
It’s really interesting that back on September 16th, when we got the first rate hike in three years, there was a lot of concern about how this might affect the broader market as 10-year yields rose. And the broader market did experience some volatility, but not a straight decline simply because 10-year yields were rising.
The interesting thing is that after all of that rise higher to 53.64 on October 7th, when you look at yields today, one day after the latest Fed meeting, they’re essentially at the exact same level they were at the September 16th meeting.
So, on balance, in the longer-term picture, the 10-year yield has not moved that much.
That doesn’t mean it’s going to stay here. Let’s analyze the current action to see where things may head next.
The Key Downside Level to Watch
Based on the move lower in yields from the October 7th high, there’s pressure being applied to the downside toward the September 22nd low at 49.26.
But that level has not been violated yet, even though yields have been hovering above it for an entire week now.
It’s the key lower level I’m watching. If 49.26 does get violated, the next step down would be 47.32.
What Would Signal a Move Higher?
If the 10-year yield starts to show movement to the upside, I would monitor the October 21st high at 51.48 closely.
That’s the level that needs to be overcome in order to resume a journey back toward the October 7th high at 53.64, ahead of a move higher toward 54.57, which is the monthly high from April 2002.
When you look at the momentum reading on the chart, it’s also hovering near neutral, which is the 50 mark, the dead center of the Relative Strength Index’s 0-to-100 range.
So essentially, this is a little bit of a watch-and-wait situation.
The two boundaries at 49.26 and 51.48, in my view, are the ones to monitor. They can give us a lot of insight into what may unfold next.
Remember that when it comes to how the Fed makes its decisions, they’re taking in a lot of economic data. So the data we get between now and the next Fed meeting will be important to watch.
You can keep tabs on those reports at a calendar like Forex Factory or your economic calendar of choice.
We’ll see what unfolds from here!
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