Strong increase in US debt yields

Yesterday optimism returned to the markets. US bond yields rose as fears of contagion in the financial sector eased. Shares of US regional banks gained after reports that bankrupt bank SVB was purchased by another entity. This pushed the US 2-year bond back above 4%. The price of gold has fallen below $1950 and a potential double top pattern is forming on the chart.

Increase in US bond yields

Investors were also comforted by a Bloomberg report over the weekend that the US authorities are considering expanding an emergency credit facility that would offer banks more support. The S&P financial sector index increased by 1,4 percent. Meanwhile tech stocks fell after a two-day rally which is a consequence of the increase in US bond yields.

The top US banking regulators said on Monday that they plan to inform Congress that the entire financial system remains on a solid footing after the recent bank failures. At the same time, these institutions will comprehensively review their policies in order to prevent future falls.

Fears have not entirely disappeared, however, as Federal Reserve Chairman Philip Jefferson said on Monday that stress among small banks could hit small businesses hardest.

Buyers capitulation

This week's key piece of information will be Friday's PCE deflator. Recall that it is inflation measure preferred by the Fed and certainly this reading will have an impact on the future path of interest rates in the US.

On the FX market we observed a slight weakening of the USD yesterday, which resulted in higher levels EUR / USD. The pair "went" above the level of 1,08. More was happening on the commodities market. Gold, due to the increase in US debt yields, lost i A potential double top pattern has formed on the chart with a neckline running around USD 1935. Only exceeding this level will give us a negative signal. So far, an attempt to break above USD 2000 has resulted in buyers capitulating twice.

Source: OANDA TMS Brokers