- The market price of US02Y shows signs for a vital downward shift that may send it towards 2.7% if it breaks through 3.6% support.
- The upcoming PCE inflation release on April 30 may strengthen rate cut predictions which will likely speed up interest rate drops.
- A decline in the US02Y coupled with growing worldwide liquidity puts pressure on the DXY exchange rate
The U.S. 2-year Treasury yield (US02Y) faces an important crossroads before the Personal Consumption Expenditures (PCE) inflation data appears on April 30. The upcoming Personal Consumption Expenditures read holds greater weight for the Fed because it should show the March inflation decline that alternative trackers such as Truflation have already recorded below 2% in early April.
US02Y Eyes Drop Toward 2.7% After Bearish Breakdown
The US02Y chart displays a defined topping pattern starting during late 2023 when traders unsuccessfully tried to recover the significant 4.4% level. The yield dropped through various support intervals until it broke down a minor consolidation region at 4.2%. The financial market data shows a local distribution pattern which backs up the future downward trend.
Source:(X)
Technically, a break of the 3.6% region could accelerate the fall towards the 2.7%–2.8% demand zone, a level marked by the blue support area and historically strong reaction points. Inflation data feeds already reflect an upcoming interest rate adjustment while the actual numbers could speed up these estimates toward a May reduction.
Dollar Index Trends Align with Global Liquidity Signals
Besides, the U.S. Dollar Index (DXY) has shown signs of exhaustion after a period of upward manipulation above the 107.00 level. Price has moved below its former support zone at 104.00 therefore indicating that the market now shows signs of downward expansion.
Source:(X)
The worldwide increase in M2 money supply demonstrates a positive environment for risky financial instruments because it has achieved successful resistance tests and started breaking out to higher levels.
Falling Yields and Liquidity Weigh on DXY
An official drop in US02Y interest rates as validated by PCE data would continue to devalue DXY. A rising trend of global liquidity and the current bullish risk sentiment together create conditions that suggest continued positive market trends. Outcome regarding tariff agreement resolution serves as an unpredictable factor which could enhance or diminish the overall market response.
