Notably, market sentiment shifted in the course of the North American session after a massive sell-off in equities that swept across global markets. In the upshot, the dollar reverted to its status as a defensive asset.
The 10-year US Treasury yield soared to 1.56%. Tech stocks were hit hard on the back of rallying bond yields. The S&P 500 slid 2.45% and the Nasdaq Composite plunged 3.52%
Today’s macro agenda (GMT 3)
- 16:30 Canada: PPI (January), US: household consumption, personal spending and income (January)
- 17:45 US: Chicago PMI (February)
- 18:00 US: Michigan consumer sentiment (February)
- 21:00 US: Baker Hughes weekly oil rig count
The FX market experienced steep gyrations yesterday, so now even buyers are wondering whether to recoup the decline in the euro ahead of the weekend or not. All major currencies are currently trading deep in the red. The hardest hit currencies are the aussie (-0.56%) and sterling (-0.43%).
At the time of writing, the euro was changing hands at 1.2142. A pin bar with a long upper wick has formed on the daily chart timeframe. Since on the daily TF a rise from the low of 1.1952 signals a correction in relation to the decline from 1.2350 to 1.1952, the risk of a decline to 1.2087 has increased. The price action often rolls back as much as 50-60% of the wick before turning around. Given that 10-year US Treasury yields fell from 1.56% to 1.48%, we expect to see a correction to the range of 1.2190-1.2205, with support at 1.2123-1.2140. The likelihood of a pullback to 1.2125 is 80%.