The Warsh Trade is taking Markets by the horn – North American Mid-Week Market Update

• Mid-Week review where we dive into the major developments for North American and global Markets
• After the US-China Summit, Markets are quickly moving towards the newer themes and these are not light ones, with the new Fed Chair repricing and confusion in the Middle East
• A classic US Dollar rally has gripped all assets, from the riskiest in Crypto all the way to Bonds and Metals, with traders pricing austere Fed balance sheet policy.

Log in to our mid-week North American Markets overview, where we examine current themes in North America and provide an overview of index and currency performance.

Now that the US-China summit has wrapped up, financial markets are quickly moving on.

Institutions are now focusing on bigger macroeconomic issues, especially the major changes expected with new Federal Reserve leadership and the ongoing stalemate in the Middle East. The President has set a new deadline, but progress remains slow.

The geopolitical situation is still at a standstill. Although another violent conflict is not expected by most in the market, a clear diplomatic solution is also out of reach.

Markets remain uncertain, with Polymarket showing only a 35% chance of a peace deal by the end of June. This ongoing uncertainty keeps risk levels high in global energy supply chains, even though the threat of war is no longer making headlines – Oil has persistently held above $100 in the past two weeks.

The main force behind this week’s market moves is the Federal Reserve. After being confirmed by the Senate last Thursday, Kevin Warsh will be sworn in as the new Fed Chair this Friday and traders are already trying to price what's next.

Markets are already adjusting for what could be a major shift in US monetary policy. Investors expect big changes to how the Fed gives guidance, measures inflation, and manages its balance sheet. With so much uncertainty, the only clear expectation is a more hawkish and restrictive central bank.

This shift toward a more hawkish Fed has sparked a strong US Dollar rally, putting pressure on the wider financial markets. As traders adjust to the idea of tighter Fed policies and less global liquidity, demand for the dollar keeps rising.

The strong dollar is drawing capital away from almost every other asset class. Riskier assets, like cryptocurrencies, are falling sharply as speculation leaves the market.

At the same time, bonds are selling off quickly, causing yields to rise as markets expect less support from the central bank. Even precious metals are losing their safe-haven appeal as yields climb.

Looking ahead to the end of the week, everyone is watching Friday’s swearing-in of Kevin Warsh to see if his first comments as Fed Chair will confirm the market’s concerns about a more hawkish approach.

Let's dive right into our Mid-Week North American Markets recap.

Read More:

• NVIDIA (NVDA) Technical: Potential mean reversion decline below 236.54 as earnings loom
• Asia open: Surging 30-year bond yield flirts with 5.20% as market eyes Nvidia and Bank of England dilemma
• Metals suffer from their upside fake-out – Silver (XAG/USD) & Gold (XAU/USD) Outlook

Stock Indices have mostly struggled in the past week, particularly in Japan – But North American benchmarks have remained mostly stable.

The US Dollar is actually back much higher compared to its beginning of May base.

After a long consolidation around and below 98.00, bulls have retaken control with the hawkish repricing from the Warsh Trade and overall hot inflation data.

To explore levels for action, check out our latest DXY in-depth article (along with a few FX Pairs).

The Dollar is now up against all major currencies, after a signficiant shift in demand since the confimation of Kevin Warsh at the head of the Federal Reserve.

The Canadian Dollar also caught up against the majority of its FX peers, with the US Dollar being the only exception.

The Loonie had lost quite some throughout the last month and largely diverged from the evolution in WTI Crude Prices – The catch up trade came from the CAD!

USD/CAD continues to rebound within its longer-run 1.3550 and 1.3950 range, now coming close to break above the middle of it.

The extreme of the range is at 1.3950, so that leaves some space for continued upside. Still, keep a close eye on the resistance levels before this and the general direction of the US Dollar

Levels to place on your USD/CAD charts:

Resistance Levels:

• 1.38 mini-Resistance +/- 150 pips
• 1.39 to 1.3925 Support turned resistance (range highs)
• 1.3950 Range high resistance

Support Levels:

• 1.3750 Momentum Pivot
• 1.3630 to 1.3660 Key Support now Pivot (4H 50-period MA)
• 1.3550 Main 2025 Support (Range Lows)
• 1.35 Key Psychological Support
• End-January Lows 1.34820

Some important data is expected to release in the coming week, including Consumer Sentiment (US) and Retail Sales (for Canada) on Friday,

The most important however will be Kevin Warsh's swearing-in, with remarks expected on Friday (10:00)

And don't forget the US PMIs tomorrow morning!

Safe Trades!

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