The past week in the U.S. financial markets unfolded against the backdrop of a subdued atmosphere, characterized by a light trading day and a slow market pace due to the Martin Luther King Jr. holiday. The Elliott wave setups shows that dollar can rally further this week.
The relationship between U.S. Treasury yields and the U.S. Dollar Index (DXY) was closely monitored last week. Inflation data revealed a slight uptick, with the U.S. inflation rate at 3.4% compared to the previous 3.1%, and the Producer Price Index (PPI) registering a decrease to 1%. Against this backdrop, the interplay between strong job data from the preceding week and the higher U.S. CPI suggested that the U.S. economy might be maintaining its robustness. Consequently, the Federal Reserve may not be inclined to implement any immediate rate cuts. That said, there can be a disconnect between market participants’ expectations and the Federal Reserve’s potential actions in 2024. The anticipation of significant cuts prompts a need for markets to recalibrate their expectations. This could result in a period of correction for both U.S. yields and the U.S. Dollar. The strong economic indicators may be signaling that the Fed is not yet contemplating a shift in its current stance.
These dynamics were discussed in detail during our recent webinar. The approval of the Bitcoin Exchange-Traded Fund (ETF) last week triggered a classic “buy the rumor, sell the news” scenario, leading to intriguing reversals in the cryptocurrency market. The webinar also delved into the potential for further declines in Bitcoin prices. For those who missed it, the content is available for review below.