As you know, at the end of last week, markets turned slightly into risk-off mode due to fresh attacks between Israel and Iran. We saw a sharp move to the upside in energy prices, while stocks faced some setbacks.
Still, I’m quite surprised that markets are doing relatively well at the start of a new week; in fact, they even turned higher during the Asian session.
Also, there was only a minor rebound on the dollar index, which is typically seen as a safe haven during geopolitical tensions. So apparently, we could still see more weakness on the dollar—but of course, we cannot rule out a potential deeper intraday wave four rally as we start the new trading week. As you know, I normally don’t expect any major breakouts on Mondays since those flows are often retraced. I would instead anticipate more clearer price action on Wednesday when we also have the Fed rate decision. In my opinion, there won’t be any surprises regarding rate cuts, because job data is still fine, and inflation recently ticked higher from 2.3% to 2.4%.
Other important data for this week will be the UK CPI, BoE, BoJ and SNB rate decision.
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Grega
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