Yields: Key Levels to Watch
The US 2-year yield is at 4.40%. A break above this level could reintroduce the 4.40%-5.00% range (the range before the collapse of the yen carry trade).
- If 2-year yields move toward 5%, expect heightened volatility, equity de-risking, and broader market stress.
- A daily close above 4.40% would be negative for risk assets, making this a crucial level to monitor.
USD: Quiet Week
With US macro news entering a quieter period, the dollar’s trajectory will largely depend on positioning adjustments rather than fresh economic data. CFTC positioning remains long, raising the risk of repositioning, but with little new information coming from the US economy, any correction could be short-lived.
- USD is at the top of its daily range, but a bearish thesis is hard to justify.
- Breakout risk remains high, with potential for another leg higher.
- If the Trump trade thesis falters, DXY seasonality in December is very bearish.
EUR: PMIs in Focus
EUR positioning remains very short but decreasingly so. The key focus this week will be Friday’s eurozone PMIs, with the composite PMI sitting at 50.0, the threshold between expansion and contraction. Any small deviation could have an outsized impact on EUR/USD.
- A weak PMI print could trigger a move below 1.05.
- Short-term outlook: EUR/USD may hold above 1.050 as USD bulls take a pause, but conviction on this view is low.
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