This currency pro is keeping tabs on Treasury yields to determine the dollar's direction.
Want to know where the dollar is headed? Jens Nordvig, global head of G10 FX strategy at Nomura Securities, is watching the yield curve for clues.
The dollar has been moving more in tandem with risk assets like stocks, Nordvig notes, and he sees the potential for that continuing if yields on Treasurys cooperate.
"We think the 10-year rate in the U.S. could break 2.40%, and we could even see a short-term spike to 2.60-70%," he wrote in a note to clients. "Such a move could be a catalyst for a meaningful additional USD gain."
However - and it's a big however - Nordvig is also on the lookout for shifts in sentiment that could make that trade considerably less attractive.
Only a few months ago, investors thought a new round of quantitative easing might be imminent, he says. "Our view is that the improvement in the unemployment rate may slow from here, and in a scenario where unemployment stops improving and core inflation appears to be moderating, further Fed easing could come back on the table." That, of course, would put the dollar right back in the doghouse.
Stay tuned.
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