On Wednesday, U.S. tech stocks sold off as a surge in bond yields weighed on sentiment. Investors dumped stocks with stretched valuations. The weakness has continued into Europe today and, judging by the price action on the major indices, we could be heading towards some volatile times.
We have seen an attempt of a new push up on stocks indices in the last few sessions with E-mini S&P500 moving into 2815 level while German DAX rallied yesterday toward 12770. If the DAX will stay in uptrend and U.S. markets also later, the U.S. dollar/Japanese yen currency pair can see more upside as well, but maybe after a deeper pullback as part can be stepping into a fourth wave after that intraday reversal down from 113.00 area.
Risk remained on the table in the first half of European session. Safe haven gold and yen fell while stock indices pushed higher with the German DAX printing a new high for the week and reached its best level since early February.
The euro/Japanese yen (EUR/JPY) currency pair is often considered to be a barometer for risk appetite. However, it is not displaying those characteristics at all at the moment. Today’s 1.4% drop in the German DAX index should have weighed heavily on this pair, but didn’t.
Stocks, the dollar and bond yields all drifted lower on Monday as investors cashed in on some of their recent bets that the anticipated fiscal boost from the incoming Trump administration will support riskier assets at the expense of bonds.