Stocks rebounded last Friday and continue to ignore the US government shutdown, but prices remain trapped in consolidation, and we could just see a retest of the upper side of the current range. The situation regarding tariffs between the US and China is still unclear, but there could be some optimism after US Treasury Secretary Bassent said he expects to meet with China’s Vice Premier soon, which could calm markets and possibly trigger further recovery in stocks after any positive news.
Regarding FX, we may get some clearer price action on the dollar index after last week’s sell-off, with price breaking out of the upward channel. This suggests we could see a gap fill around 97.70, which might act as temporary support once tested. However, overall it still looks like dollar weakness can resume, as the previous recovery was just a corrective three-wave move from the September lows. Its alos important to mention lower US yields.
The key event for a potential dollar move may not come right away — who knows we may even have to wait until Friday when the US CPI figures are released.
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