Pipruit: Well, I think so, but could you show me some charts… Commander in Pips: Be my guest: Chart #1 | Dollar Index (red) and 10-year note futures price (black), monthly Commander in Pips: What do you see here? Pipruit: Well, I recognize the US DX chart, since I’ve seen it in a previous chapter. The first jump was due to the run-to-quality turmoil, and we see that price on 10-year not has risen significantly, later there was some relief, and an attempt to exit from recession that has failed. In fact, this was just turned into the second leg and W-shape of recession. Now we see that fast growth in US 10-year notes and I suppose that this is because of risk aversion again due to solid problems in the EU – Greece and Italy in particular. Commander in Pips: You’re absolutely right, but maybe you see something else? Pipruit: Well, it looks like the US DX a bit lagging behind the 10 year interest rates chart… Commander in Pips: This is just one way to interpret it. But since this is a cycle – it’s very difficult to say what is lagging and what is advancing. From one point of view, we might say that since interest rates have started to rise – dollar index turns to growth, but from another point of view, since inflation is significant due to dollar devaluation – it forces the rising rates. In fact Bonds and the US Dollar stands right at the edges of cycle and encircle it, if we can say so. If bonds are our starting point, then we can think as follows: After a recession, when inflation is anemic and rates are low – the economy starts to climb out of a pit. This is an attractive time to borrow money, and hence, increase production and invest in business development. Since corporations are starting to grow momentum – stock market turns to growth also. Growing economy demands more raw materials – this leads to price growth for commodities. Since commodities becomes more expensive relatively to US Dollar – inflation starts to growth and this demands rate increasing by Fed to control inflation and this procedure leads to growth in the US Dollar.