Has the dollar rally come to the finish or is it a calm before the jolt?

The dollar began to give up after the fall in the yield of US Treasury securities, the value of which dropped to three-month lows. Investors are seriously concerned that a pause may form in the cycle of raising the Fed rates. In addition, the inversion of the yield curve shows signs of impending recession.

The fall in US government bond yields is a negative factor for the dollar, especially when compared to major currencies. The yield curve for 2-year and 10-year bonds is a key indicator for investors since inversion is seen as a harbinger of recession. The yield curve is inverted when the yield on bonds with a later maturity is lower than that of short-term bonds. At present, the yield curve is smoothed as the continuing increase in interest rates raises the yield of short-term securities, while the longer-term yield is falling amid inflation and a slowdown in global growth. Currently, the US Treasury yields are near critical levels of support, where a breakout could seriously increase the pressure on the dollar.

In addition, the dollar is under pressure from a temporary truce in the trade conflict between the United States and China, which has increased investors' appetite for more risky currencies. In addition, the currency is under pressure by a softer tone from the Fed. Currencies such as the Chinese yuan, which suffered during the trade war between the United States and China, are expected to trade more strongly against the dollar in the coming weeks as investor sentiment improves.