- A bounce in the U.S. dollar could reduce inflationary pressures into the second-half of the year. However, upside remains limited after breaking a decade long uptrend last year.
- Commodities, including oil and metals are testing initial resistance, while corn and soybeans suffered sharp declines recently. Pullbacks are expected to continue over the short-term, which could provide timely entry points along the broader commodity upcycle.
- The copper/gold ratio, an important gauge of risk-on vs. risk-off, is also testing resistance, but has broken above a decade long downtrend from last year.
- The stock/bond ratio appears stretched, which could trigger some Treasury shorts to unwind positions if volatility rises into Q3.
- For now, the S&P 500 is holding support above the 50-day moving average, led by tech and consumer discretionary stocks. The growth trade should continue as the CBOE Volatility Index (VIX) drifts towards support at 12.
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