The dollar continues to rally just as we were warming to the idea of a new low—and so it goes.  What’s the driver?  Maybe the decline in gold coupled with a small pull-back in crude (see reader chart next page)?  But because they have been correlated, it is tough to say one or the other is the driver.

The new theme seems to be higher US interest rates (the better than expected durable goods report yesterday has helped validate this view).  The Fed may actually hike rates before the end of the year, was mentioned in the lead story in the Financial Times today; that would represent a major shift in expectations.

Forecasting a Fed rate hike we are not so sure.  But we’ve seen a decent move down in US 10-year notes lately i.e. higher rates.  And 10-year notes have been yet another price series moving in tandem with the US$ index.  Below a chart of 10-year note futures vs. US$ Index Inverted (red line):

The other day, one of our readers (thank you Mihaly) shared an interesting chart with us; we thought you might have an interest.  It is a weekly chart of crude oil showing that two of the major legs are similar in distance travelled.  We have recreated the chart below:

Black Swan Capital