Fundamental Overview
Markets enter a significant week with elevated bond yields, ongoing conflict in the Middle East and important central-bank decisions ahead. US inflation remains above target, while consumer sentiment weakened to 47.8 and 12-month inflation expectations stand at 4.6%.
Attention now turns to central banks. The Federal Funds Rate forecast has moved to 4%, with the session highlighting the possibility of a rate hike on Wednesday. The Bank of England is expected to pause on Thursday, while the Bank of Japan will also be closely watched for its rate outlook and potential implications for yen repatriation.
Risk Sentiment
The market narrative is mildly risk-off. Elevated bond yields, hawkish central-bank expectations, Middle East conflict and concerns around the AI trade are contributing to a more cautious backdrop.
US bond yields remain at significant highs and continue pushing higher, while the potential repatriation of Japanese capital adds another important dynamic for global markets.
Technical Overview
The bias is towards further weakness in equity indices and strength in the US dollar. The Nasdaq presents a potential sell opportunity below 28,892, while EUR/USD is being watched for a sell below 1.1566.
Further downside is also anticipated in the yen pairs, with EUR/JPY watched below 177.84 and GBP/JPY below 207.08. These moves have not yet developed, reinforcing the importance of patience.
US Oil maintains a bullish bias, with further upside favoured amid the ongoing Middle East conflict.
Focus for Today
The priority is a targeted but patient approach. Mild risk-off conditions provide a clearer directional bias, but the identified levels remain important before acting. The team will continue watching for weakness in indices, US dollar strength, yen strength and further upside in US Oil.
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