MID-WEEK MARKETS UPDATE OVERVIEW:
- The US Dollar (via the DXY Index) has surged higher alongside Treasury yields and rising Fed rate hike odds.
- Gold prices have lost significant technical support, and with silver prices crumbling to fresh yearly lows, more weakness may be in store for precious metals.
- Supply chain issues and increasing global demand have lit a fire under energy markets.
It’s That Time of the Year
Harvest season has arrived, and that’s been bad news for bond and equity markets. Higher US Treasury yields and lower stock prices make for a nasty mix as traders seem to be selling everything. Well, almost everything. Energy markets are on fire, with Brent oil rising to fresh highs and crude oil within a stone’s throw of its yearly peak.
Higher energy prices are helping feed the hot inflation narrative, which is incidentally spilling over into FX markets as traders discount a more aggressive Federal Reserve (chart 1 below). Elevated Fed rate hike odds and shifts in the US Treasury yield curve have come hand-in-hand with a stronger US Dollar, which has hit freshly yearly highs against major counterparts like the British Pound and the Euro.
For full commentary on the DXY Index, EUR/USD, EUR/JPY, GBP/USD, GBP/JPY, EUR/GBP, crude oil, gold, silver, and US stocks, please watch the archive of this week’s Mid-Week Market Updates session held on Wednesday, September 29.
CHARTS OF THE WEEK
Eurodollar Futures Contract Spread (September 2021-DECEMBER 2023) [BLUE], US 2s5s10s Butterfly [ORANGE], DXY Index [RED]: Daily Rate Chart (January 2021 to September 2021) (Chart 1)
GOLD PRICE TECHNICAL ANALYSIS: DAILY CHART (JULY 2020 TO SEPTEMBER 2021) (CHART 2)
CRUDE OIL PRICE TECHNICAL ANALYSIS: DAILY CHART (SEPTEMBER 2020 TO SEPTEMBER 2021) (CHART 3)
--- Written by Christopher Vecchio, CFA, Senior Strategist
