The USD interest rate outlook remains bullish for the immediate period ahead. In my last Elliott Wave analysis of the 5 year USD swap curve posted on 12 Dec, I mentioned that the odds are clearly high for a move higher, and sure enough, interest rates have gone up. The 5-year swap rate actually tested the 2.40% technical resistance level and came off nicely by 34 basis points.
Going forward, we should continue to remain positive for USD interest rates, and if we get a break above the down trend line shown in the charts, an event I feel is likely to happen, then we should be prepared for a move higher to around 2.67%.
Corporate treasurers who are exposed to floating rates should take note that it looks incresingly likely that we might have posted a cyclical low in interest rates back in early November, and so there is an urgent need to discuss internally a strategy to hedge exposures. A good time will be when you get some unexpected bad economic news as short term traders will provide you with a valuable opportunity when they exit their weak positions.