Interest rates are crucial for analyzing currency and economic trends, and the EdgeFinder simplifies this by incorporating a unique scoring system based on the U.S. 2-year Treasury yield. Rising interest rates can boost the value of a currency, like the U.S. dollar, as they signal economic confidence and attract investment. On the other hand, declining rates often make borrowing cheaper, potentially benefiting assets like stocks or commodities.

The EdgeFinder uses an 8-period simple moving average (SMA) applied to the 2-year Treasury yield to gauge interest rate trends. Here’s how it works:

Bullish Scenario: When the 2-year yield is above its 8-day SMA, it indicates rising interest rates. This is generally bullish for the U.S. dollar, as higher rates attract foreign investment, strengthening the currency.

Bearish Scenario: If the yield drops below its 8-day SMA, the EdgeFinder interprets this as a potential easing of interest rates, often considered bearish for the currency. However, lower rates can boost sentiment around assets like stocks and gold, which typically benefit from cheaper borrowing.

The EdgeFinder processes this information for each instrument it tracks, creating a score to help you gauge market trends at a glance. Instead of crunching numbers manually, the EdgeFinder’s scoring system automatically updates, giving you a snapshot of how interest rates are likely influencing different assets and markets.

How is this scored on the edgeFinder?

Interest Rate Scoring Concept

The interest rate breakdown is designed to measure changes in the 2-year yield in the US and forecasts from central banks.
1:
Take the 7 day moving average of the US02Y (2-year treasury yield)

Interest Rate Scoring for Indices, XAUUSD, USOIL, & BTCUSD

If price is above the moving average, -1
If price is below the moving average, +1

Interest Rate Scoring for Currency Pairs

Concept: Uses current and next quarter’s forecasted interest rate for both currencies (Data from the Central Bank Forecast Page)

Currency A
If forecast > current, +1
If forecast < current, -1
If forecast = current, 0
Currency B
If forecast > current, -1
If forecast < current, +1
If forecast = current, 0

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