After the dollar surged higher yesterday, we're seeing calmer tones prevail ahead of European trading today. Equities saw a late rebound, in which Wall Street ended the day with decent gains. That kind of poses the question to markets: which signal exactly is the one to follow now?
China worries weighed on sentiment initially and stocks were lower while FX flows reflected risk aversion. But then, stocks shrugged off the pessimism to climb further to start the week. So, what's next?
It's going to be a bit of a push and pull feel but as mentioned yesterday here, there is some room for the gains in equities to extend but take note of the S&P 500 chart as it approaches key resistance levels:
That might offer investors some cause for a pause in the momentum, taking a cue from the bond market and FX over the past few sessions. For now, the mixed tones to start the week is leaving a lot to be desired as traders are more cautious as we approach European trading. Narrow ranges are prevailing and dollar pairs are less than 0.1% changed for the most part.
There won't be much on the agenda to shake things up, so we'll have to see if the dollar can sustain its rebound or if there is some added pushing before the US retail sales data tomorrow.
