Looking Forward to this Week
The main focus this week will have all eyes on the debt ceiling and NFP.
With the DXY spiking through 104.5 and set to break Monday's low today, the dollar continues to march higher.
Could this be the end of the May seasonal run?
103.18 - 103.5 is the next support, the key will can price remain supported at 103.8.
This week's data will most likely lead DXY to test its most recent structures.
An Overview on Last Week
The past week has seen US10Y push higher, but it appears to be running out of steam as we see the price breaking the trend line, which would entail a further sell off in USD should we see US10Y decline, and more than likely to see some JPY strength.
There could be some very nice opportunities on EJ or GJ shorts if we see those. Watching Gold would be an alternative trade to JPY longs, as both have a negative correlation to US10Y in general.
With the debt ceiling still looming, the breakdown in talks on Friday obviously created some market volatility, albeit more appeasing talks from both sides over the weekend are expected to carry on today.
Another major economic event to keep an eye on for this week will be the print on Consumer confidence & ISM on both Wednesday and Thursday, respectively.
With NFP data coming out on Friday, the labour data will be significant in terms of how the Fed will continute to monitor the inflationary issues.
Money markets are now forecasting a 5% interest rate by year end, meaning no more rate cuts are factored in for 2023, although data releases could soon change their expectations.
In case of a weaker than expected NFP, doors could be open to long gold - timing will be of the essence.
Looking at the US Debt Ceiling
A deal was agreed between President Joe Biden and House Speaker McCarthy over the weekend. This doesn't necessarily mean that the job is now done, as the agreement still needs to pass through both houses with the X date being June 5th, 2023.
However, the possibility of an agreement not making its way through either house could see some severe market wobbles, due to uncertainty in the market.
A move below 4214 could see a quick sell off in the S&P500. However, in case of a positive outcome and the agreement coming through both houses, we could expect some positive moves on risk assets over the short term.
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