USD/JPY Intermarket: Is the USD weakness amid a gold drop and treasury yield rally, a bear trap?

US stock markets rose to fresh record highs on Wednesday. The resulting sell-off in the treasuries pushed the benchmark 10-year yield above 2.5%.

The hardening of the yields also weighed over gold, pushing the safe haven metal down to $1196/OZ levels.

However, the US dollar took a beating. The rally in stocks, yields and the weakness in the treasury yields are all part of the “Trump trade’. But somehow the US dollar lagged. The USD / JPY pair ended on a weaker note at 113.30.

Experts believe the USD lagged as Trump and Mnuchin warned about the negative effects of a strong dollar earlier this week. Furthermore, the rise of protectionism means, currencies with high current account deficit to GDP ratio will underperform. US does run massive current account deficit.

Nevertheless, the divergence may be a bear trap. The currency pair could do a “catch up job” if the Trump trade continues to push stocks and treasury yields higher and gold lower in the coming days.