Overnight, while the US slept

Equities sold off into the close as the energy shock bit: the Dow led the way down, falling 626.72 points (−1.17%) to 52,787, the S&P 500 shed 44.94 points (−0.58%) to 7,673, and the Nasdaq gave up 85.58 points (−0.32%) to 26,421. Energy-sensitive cyclicals and the transports took the brunt of it. This was an orderly de-risking rather than a panic — but it was broad.

Rates & DXY: the 2-year Treasury yield rose about 1.5 basis points to 4.394% and the 10-year added roughly 1.2bp to 4.796%. That leaves the 2s10s curve (the gap between 2-year and 10-year yields) at roughly 40bp and flattening slightly — the front end is doing the work. That shape is the real message: the market is not repricing long-run growth, it is repricing the next Fed meeting. The dollar index (DXY, the greenback measured against a basket of major currencies) actually slipped around 0.3% to about 98.82 — but that was a yen story rather than a dollar story, with the yen bid on expectations of more Bank of Japan tightening and continued unwinding of carry trades (borrowing cheap yen to buy higher-yielding assets elsewhere).

The dominant driver — oil, war, and a Fed that looks willing to hike: Brent crude touched about $99 after a weekend escalation in which US forces struck three Iranian oil tankers following Iranian missile attacks on two US Navy warships, and Iran-aligned Houthi forces hit Saudi energy facilities, wounding more than 70 people. Saudi Arabia halted operations at certain sites. Traders now price roughly a 58–60% chance the Fed raises rates by 25bp at the 16 September meeting, up sharply from where it sat a fortnight ago.

This is the textbook supply-side shock — a hit to the supply of energy that pushes prices up while hurting growth, as opposed to a demand-side safe-haven flight into a financial crisis. The chain runs: oil spikes → inflation expectations firm → the central bank turns hawkish → real rates (interest rates after subtracting inflation) rise → the dollar and yields get a bid → gold, which pays no yield, gets sold. The critical condition for that chain is a central bank that actually reacts, and this one clearly intends to. Kevin Warsh's Fed has moved the September hike from unlikely to better-than-even. The policy channel is wide open, so I'm treating this as gold-bearish rather than reflexively buying the war headline.

Gold: trading 4355.38/4355.58. Day range 4344.89–4443.03; prior-day high/low 4435.26 / 4381.16. Gold is down roughly $88 from the session high and has broken clean through yesterday's floor at 4381.16, with the last three hours of the US session doing most of the damage. Short-term momentum readings are stretched to the downside at the Asian open (RSI 24.6 on the 15-minute chart — RSI measures how hard price has run in one direction; below 30 is "oversold" and often precedes a bounce), so I'd expect a retracement before the next leg. I want to sell that retracement, not buy it.

Crypto: Bitcoin 78,545 (15-min RSI 50.8, ATR — average true range, a measure of how much price typically travels in a bar — $177); day 78,477.8–78,601.9, prior-day high/low 79,467.4 / 77,588.7. Bitcoin has fallen from around $80,350 at Monday's open and spent the last twelve hours chopping in a tight $78.2k–79.0k band after defending yesterday's low. Ether 2,483 (RSI 46.9, ATR $8.22); day 2,480.17–2,486.17, prior-day high/low 2,506.17 / 2,438.77. Neither is behaving like a haven — they are trading as long-duration risk assets, and higher real rates are their kryptonite.

Key FX:

• EURUSD 1.16260 — RSI 53.0 (neutral), ATR 3.3 pips. Day H/L 1.16212 / 1.16257, prior-day H/L 1.16358 / 1.16074. Dead flat into tomorrow's ECB.
• GBPUSD 1.35351 — RSI 40.7, ATR 4.6 pips. Day H/L 1.35313 / 1.35405, prior-day H/L 1.35620 / 1.35216. Sterling quietly heavy; no clean level to work with.
• USDJPY 153.964 — RSI 45.8, ATR 16.4 pips. Day H/L 153.914 / 153.989, prior-day H/L 154.425 / 152.890. That prior-day range is enormous — a 153-pip swing including a violent air-pocket down to 153.45 mid-session before it clawed back. The yen has come from roughly 159 a week ago. This is a genuine trend.
• AUDUSD 0.72211 — RSI 53.3, ATR 3.1 pips. Prior-day H/L 0.72310 / 0.72047. Holding up better than you'd expect for a currency whose biggest customer is a net energy importer.
• NZDUSD 0.58591 — RSI 56.2, ATR 3.3 pips. Prior-day H/L 0.58855 / 0.58360. Wide spread at the open.
• USDCHF 0.80942 — RSI 47.7, ATR 3.8 pips. Prior-day H/L 0.81207 / 0.80776. The franc is firm, which fits the risk-off tone.

Cross-asset snapshot:

Asset	Now	vs Prior Close	Vector
S&P 500	7,673	−0.58%	Risk-off
US 10Y	4.796%	+1.2bp (2Y +1.5bp)	Hawkish, curve flattening
DXY	~98.82	−0.3%	Softer, but yen-led
Gold	4,355.48	−$79.8 vs prior-day high	Bearish — supply shock + open policy channel
Bitcoin	78,545	−$922 vs prior-day high	Weak
Brent	~$99	Six-week high	Iran/Saudi supply disruption

Normal session ahead, but note liquidity is thinner than usual in gold at the Sydney open and spreads on the crosses are wide for the first hour.

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