Risk-on sentiment keeps stocks supported as US Dollar faces more pressure

Gregor Horvat Wavetraders

Global equity markets remain well supported as easing US inflation continues to reinforce expectations that the Federal Reserve will leave interest rates unchanged. Technology and AI-related stocks are once again leading the advance, keeping the market firmly in a risk-on environment. With no major economic reports scheduled for today, trading activity may remain relatively quiet heading into the weekend.

From a technical perspective, 10-Year US Treasury Notes continue to recover, contributing to the recent weakness in the US Dollar Index (DXY). However, Treasuries could still be completing an abc pullback in wave "b", leaving room for one more decline in wave "c". Such a move could trigger a larger recovery, or at least a period of sideways consolidation, in the US dollar.

At the same time, the DXY may have already completed its projected abc irregular flat correction in wave "iv". A break back below the 99.28 level would strengthen the case for a new decline in wave "v". If that bearish scenario unfolds, it may also suggest that the 10-Year Treasury Notes have already formed a bottom within a diagonal pattern. A stronger rally toward the 110 area would provide additional confirmation and could keep pressure on the US dollar.

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Author

Gregor Horvat

Wavetraders

Experience Grega is based in Slovenia and has been in the Forex market since 2003.

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