Recently, the markets have shown significant volatility in both the bond and currency sectors, primarily due to heightened concerns regarding the fiscal sustainability of the United States.
In the U.S. bond market, the 30-year Treasury yield reached a two-year high of approximately 5.15%, while the 10-year yield increased to 4.6%. These sharp increases indicate a growing apprehension about fiscal risks, which have unsettled not just the bond market but also the U.S. Dollar, leading to widespread market instability.
Key Catalyst: US Fiscal Risks vs. EU-US Tariff Postponement
The escalating fiscal concerns that drove bond yields and the U.S. Dollar lower last week are likely to continue impacting markets in the near future. However, a glimmer of hope emerged over the weekend when President Trump declared a delay in the proposed 50% tariffs on EU goods, postponing implementation until July 9.
This announcement contributed to a rebound in global equity futures on Monday, with both U.S. and European indices registering strong gains at the market open.
Despite this renewed optimism, investors should exercise caution. The fiscal situation in the U.S. remains a significant risk, and uncertainties linger regarding ongoing trade negotiations—not only with the EU but also with other trading partners.
In summary, the EU tariff delay offers temporary relief, not a definitive solution. Markets may continue to experience volatility as these fundamental issues develop.
Market Sentiment Swinging
Global market sentiment has been fluctuating between optimism and caution in recent weeks. Overall, optimism prevails in global equity markets, bolstered by a notable easing of trade tensions since April.
However, the U.S. Dollar has generally weakened, reflecting a decline in investor confidence amid persistent fiscal risks. Last week, the Dollar fell below the critical 100 level and may continue to weaken in the upcoming days.
Technical Outlook for the Week
DXY: Losing Ground Below 100
The US Dollar was unable to maintain its earlier gains and faced renewed selling pressure last week, dropping below the key psychological 100 level.
With the Dollar now below 100, there is potential for further declines, especially given the current unfavorable environment for the US Dollar.
If the Dollar remains pressured below this level, it could signal the beginning of a prolonged period below 100.
Gold: Bullish Consolidation
As previously noted in our gold analysis, the precious metal continues to hold steady above the crucial $3,200 support level—reinforcing a bullish foundation amid ongoing global uncertainty and shifts in risk sentiment.
From a technical standpoint, gold rebounded strongly last week but is now encountering resistance around the $3,350 level, which may limit further gains in the short term. This indicates the possibility of a bullish consolidation phase, where prices may slightly retreat but remain supported above key technical levels.
Traders should watch for potential “buy-the-dip” opportunities if price action stays above short-term support. As long as gold maintains its structure above $3,200, the broader bullish trend remains intact.
In the near term, traders should keep an eye on potential retracements toward the $3,320 and $3,270 support zones, which could present buying opportunities if gold sustains its bullish structure. As long as price action remains supported above these levels, the broader uptrend remains intact.