The dollar recovered as the US–Iran truce looked less secure, with the dollar index edging back towards its April highs after earlier losses. US Treasury yields continued to rise, keeping government bonds under selling pressure, yet the dollar’s bid remained restrained even as yields increased.
US equities pushed higher, with the S&P 500 at fresh record levels and on course for a ninth straight weekly gain, a run seen only a handful of times over the past 70 years. Gold slipped below $4,400, back to levels last seen during March’s extended lows, and is testing its 200-day moving average; a break could target $4,000-$4,100. In crypto, weakness that began in May deepened after Bitcoin failed to hold above $82,000, raising the risk of a move towards $65,000, while Ethereum fell below $2,000 and revisited long-term support. The diary turns busy with Monday’s ISM Manufacturing Index, Tuesday’s preliminary May eurozone inflation, and Friday’s NFP after the prior 115,000 reading; eurozone inflation is at 3%, and the ISM price component previously hit a four-year high.
Equity Markets and U.S. Dollar Positioning
With the S&P 500 recording its ninth straight week of gains, a rare event historically, we see the market as overextended in the short term. Similar streaks, like the one in late 2017, were often followed by periods of consolidation or sharp pullbacks. We are therefore buying near-term put spreads on the index to hedge against a potential profit-taking wave before the summer holidays.
The US Dollar Index is pushing back towards its April highs of around 106, but we are not convinced this strength will last. The unusual dynamic where rising 10-year Treasury yields, now over 4.5%, are not providing a stronger boost to the dollar suggests underlying hesitation in the market. We are treating this as a range-bound environment ahead of key data, using options to sell volatility on currency ETFs.
Commodities and Cryptocurrency Market Strategies
Gold’s drop below $4,400 an ounce puts it at a critical test of its 200-day moving average, a support level that has held firm on multiple occasions since 2023. Unlike previous tests, however, the market is not heavily oversold, increasing the risk of a breakdown. We are establishing bearish positions by buying puts, targeting a move towards the $4,100 area if this key technical level fails to hold.
In the cryptocurrency market, the bearish momentum is building, and we view Ethereum’s struggle to hold $2,000 as a leading indicator of broader weakness. Data from the derivatives market shows a rising put-to-call ratio, signaling that traders are increasingly paying for downside protection. We are therefore adding to short positions, anticipating Bitcoin may revisit its earlier 2026 low near $65,000.
This coming week is all about event risk, centered on Friday’s Non-Farm Payrolls (NFP) report. Implied volatility typically rises ahead of this release, so we are preparing for a potential spike in market turbulence. Our strategy is to either reduce overall risk exposure or position for a “volatility crush” by selling short-dated premium after the jobs number is released.
