On Tuesday, investors had some comfort after the US stock markets rallied late in the day. Still, Asian equities and the dollar remained directionless as investors pared risky assets on expectations the US Federal Reserve could raise interest rates as early as March.
These expectations also boost the 10-year Treasury yield to a two-year high. Despite early short-term corrections, it appears the increase in long-dated Treasury yields will continue.
The rapid spread of the Omicron variant of Coronavirus is also weighing on markets as US hospitalizations due to COVID-19 hit a record high on Monday.
After the major averages continued to decline on Monday, US futures were flat overnight, apart from the NASDAQ, which ended its four-day slump.
Dollar Edges Lower
With the USD failing to rally even though US bond yields are rising relative to other G10 economies, many are wondering what will be required to push the currency higher.
For that reason, market participants are keenly waiting for inflation data due to be released Wednesday that could show core inflation at 5.4% - the highest figure in a decade.
The USD index trades in a falling pennant pattern between 96.48 and 95.55. Momentum oscillators reflect that bullish forces are fading.
The only hope is that USD remains above the 50-day and 200-day EMAs, which can give some time to buyers to regain momentum for further traction.
Gold Bulls Keep Above $1800
Gold was up on Tuesday morning in Asia, with a weaker dollar lending support ahead of chair Powel's speech tonight.
The precious metal is consolidating in a range. Currently, buyers are holding the ground above 1800, aiming for 1831 as immediate resistance.
Sterling On The Edge Of A Descending Channel
In the wake of a weaker dollar and stronger pound, GBP/USD is climbing to overstep the 200-day EMA around the 1.36100 mark.
On Tuesday, the pair is trading at the upper edge of its descending channel, which is expected to offer a wall of resistance to the pound ahead of the release of UK economic data.
Conversely, a break above this level may encourage more buyers to draw in, taking cues from the technical setup.
Events Of The Day
On Tuesday, several data releases, including the latest reading on UK GDP for the quarter ending in November and UK manufacturing and industrial output for November. Global investors will be watching for any clues from Fed officials about the timing of interest rate hikes.
The confirmation hearing for Federal Reserve Chairman Jerome Powell will take place on Tuesday night. On the same day, Kansas City Fed President Esther George and St. Louis Fed president James Bullard will speak about economic policy.