Market Overview

Key Inflation Data, 10-Year US Yields in Focus This Week

Hello traders, I hope you had a fantastic weekend!

Some traders were off yesterday due to the holidays in the US and UK, so the market could have started off slow. However, the rest of the week is likely to pick up as markets anticipate important inflation data from both the US and the Eurozone. Focusing on the US: last week, we saw US yields rise, which helped stabilize the dollar, especially following strong US PMI data. Therefore, the PCE index will be crucial to monitor towards the end of this week. It will be insightful to see if the Fed will maintain its current “higher for longer” stance for an extended period, which could be a significant risk for the stock market.

As we look at US yields, we’re still observing a bearish Elliott Wave pattern, which is approaching some notable potential resistance zones. From an Elliott Wave and sentiment perspective, I wouldn’t be surprised to see a reversal to the downside soon, which might mean other assets could continue to recover.

Turning to the EUR/USD, the EUROZONE HICP will be very important for the ECB’s rate decision, given the widespread speculation that they may cut rates. If inflation cools down, the Euro could come under pressure across the board. Conversely, if the data is hotter than expected, this could lead to much more upside, especially since many have been bearish on the Euro recently based on the speculation of a rate cut. If expectations are not met, this could significantly change the near-term trend for the Euro.

For markets, I think that the 10-year US yields are the most important chart to track this week. If we see limited upside, there will be more dollar weakness, which will give some opportunities on other assets. On the opposite side, breakthrough resistance on US yields will mean that the dollar will have a longer pause.

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