The bond market holds the cards for trading this week

<p>It was a volatile trading period yesterday, with an <a href="https://www.forexlive.com/news/us-empire-manufacturing-index-for-january-437-versus-50-estimate-20240116/" target="_blank" rel="follow">abysmal Empire state manufacturing survey</a> initially keeping markets in check before traders brushed that aside and reacted to Fed Waller's remarks <a href="https://www.forexlive.com/centralbank/waller-qa-it-will-be-up-to-committee-on-timing-of-when-to-start-cuts-20240116/" target="_blank" rel="follow">here</a>. At the end of the day, yields settled higher and that underpinned the dollar while weighing on risk sentiment. It was a squeeze of sorts across the board but broader markets could perhaps take in some comfort that bonds did not cross a key line in trading yesterday:</p><p>10-year yields in the US continue to hold just below its 200-day moving average (blue line) at 4.081% and the 23.6 Fib retracement level at at 4.075%, at least for the time being. That is still helping to limit the squeeze in broader markets that we saw yesterday.</p><p>And so, if bond traders have reason to chase a stronger selloff i.e. higher yields, the moves yesterday may just be an appetiser for things to come in the short-term. The US retail sales data today might just be a catalyst for such a move, so keep a close watch on that.</p><p>Looking to other markets, USD/JPY itself is now running up against a test of its 100-day moving average at 147.41 while EUR/USD is also closing in on a test of its 200-day moving average at 1.0846. Gold also tumbled amid a break of key near-term levels and is now inching towards a test of key trendline support near $2,017. And in the equities space, are we looking at a potential double-top for the S&amp;P 500 near 4,800?</p><p>There is much on the line for traders this week but the bond market is the one holding all the cards.</p>

This article was written by Justin Low at www.forexlive.com.