Dollar back up after Warsh

Markets start the week on a cautious note, with higher US yields and renewed geopolitical tensions weighing on risk sentiment. Fed Chair Warsh delivered a more hawkish message on Friday, pushing expectations for a September rate hike close to 60% and sending the US 2-year yield back above 4.3%. Meanwhile, fresh tensions between the US and Iran have pushed crude oil higher, adding to inflation concerns. Stocks are under some pressure, while gold also turned south after Friday’s sharp sell-off. Focus this week now turns to US ISM data and especially Friday’s NFP report, which could be important for the next Fed decision and the US dollar. 

So far, the Dollar Index has made an important rebound, but it's not really a five-wave recovery yet. However, it's still possible that the market will extend higher if we do not get an overlap with 99.26. That's something to watch at the beginning of this week. If we get an overlap, then we will know that the recovery here is corrective and that the dollar can resume lower. But if we get another intraday rise and a move beyond Friday's highs without overlaps, then it's really possible that this recovery will unfold as an impulse, meaning a bullish structure away from 98.55.

GH