Overnight, while the US slept

Wall Street couldn't shake three problems at once: US stocks closed lower on Monday, with the S&P 500 off roughly 0.5% to around 7,620, the Dow down about 0.3% and the Nasdaq Composite about 0.6% weaker. (Those closing percentages are the best figures I have this morning; treat the index levels as approximate.) The damage was concentrated in semiconductors — the VanEck Semiconductor ETF shed over 4% — after the chief executives of Anthropic and OpenAI both publicly called for the industry to slow the pace of frontier AI development over safety concerns. Money rotated rather than left: CrowdStrike +10.4%, Palo Alto Networks +9.0%, FactSet +7.4%, while Hewlett Packard Enterprise, Teradyne and Coherent each dropped more than 8%.

Rates & DXY: the US 10-year Treasury yield pushed to around 5.00%, its highest since October 2023, while the 2-year sat near 4.666%. Note the shape, not just the level: the long end is making four-year highs while the front end is not, so the curve is bear-steepening — that is the bond market pricing an inflation and term-premium problem, not simply a Fed that is about to hike once. The dollar index (DXY — a gauge of the US dollar against a basket of major currencies) firmed about 0.3% to 99.44. Futures pricing for a 25 basis-point hike on Wednesday ran between 86% and 88.5% through the session, up from roughly 67–69% before Friday's inflation print.

The dominant driver — a genuine supply shock: Saudi Arabia shut its East-West pipeline, the route being used to bypass the closed Strait of Hormuz, after drone attacks. Yemen's Houthis claimed direct hits on the King Khalid Air Base and said they had seized the Greater and Lesser Hanish islands, tightening their grip near the Bab al-Mandeb shipping lane. Oman then postponed its Hormuz talks with Iran without setting a new date. Brent traded up through $106 and toward $108, WTI around $103, after Brent already gained close to 9% last week.

Now apply the framework, because this is where most people get gold wrong. This is a supply-side shock (oil spike driven by conflict) rather than a demand-side flight to safety. Supply-side shocks push inflation up, which normally pushes central banks to tighten, which lifts real rates (interest rates after subtracting inflation) — and gold, which pays no interest, hates that. The critical test is whether the central bank actually reacts, because if it declines to tighten the chain breaks and the same shock turns gold bullish. Here the Fed is not declining. It is about to hike into the shock. So the transmission is wide open and gold is on the wrong side of it. That is not a guess — it is what happened.

Gold: trading 4298.70 / 4298.91. Session range 4253.59–4355.44; prior-day high/low 4402.51 / 4288.33. That is a $150 round trip from Friday's high to yesterday's low, with a $45 bounce off the base overnight and RSI (a momentum gauge running 0–100, where above 70 is stretched and below 30 is washed out) back to a neutral 50.9. Silver was hit harder, down around 2.9% to roughly $63.33. I'd call this a bounce inside a downtrend, not a turn.

Crypto: Bitcoin 78,888.95 (RSI 51.2, ATR $244); yesterday's range 76,323.64–79,586.23. Bitcoin reclaimed $78k as House Democrats convened on the CLARITY Act, and the volatility flushed over $223 million of leveraged positions including $41 million of shorts. Ether 2,555.90 (RSI 55.9, ATR $16.35); yesterday's range 2,461.37–2,613.17. Ether is the strongest momentum reading on my board this morning — a notable reversal from a week of underperformance.

Key FX: (ranges are still thin this early in Sydney, so I'm quoting yesterday's full range as the meaningful structure)

• EURUSD 1.15492 — RSI 47.4 (neutral), ATR 3.1 pips. Yesterday's high/low 1.15982 / 1.15231. The euro is the most oil-import-exposed major; $106 Brent is a straight terms-of-trade hit.
• GBPUSD 1.34999 — RSI 50.3, ATR 3.2 pips. Yesterday 1.35286 / 1.34641. Pinned on the 1.3500 figure and going nowhere ahead of the Bank of England later this week.
• USDJPY 154.332 — RSI 46.2, ATR 7.9 pips. Yesterday 155.002 / 153.369. Rejected at 155.00 and back to mid-range. Above 155 is where Japan's Ministry of Finance has historically started talking the yen up, so the upside isn't free.
• AUDUSD 0.71363 — RSI 44.0, ATR 2.5 pips. Yesterday 0.71691 / 0.71082. Soft, and squarely exposed to Chinese activity data at midday.
• NZDUSD 0.57760 — RSI 44.4, ATR 3.5 pips. Yesterday 0.58190 / 0.57572. The weakest high-beta major on the board.
• USDCHF 0.81671 — RSI 43.8, ATR 4.0 pips. Yesterday 0.81953 / 0.81534. The franc is quietly doing what it always does when there's a war premium.

Cross-asset snapshot:

Asset	Now	vs Prior Close	Vector
S&P 500	~7,620	~−0.5%	Risk-off, semis-led
US 10Y	~5.00%	Rising (4-yr high)	Hawkish
US 2Y	~4.666%	Rising	Hawkish, curve steepening
DXY	99.44	+0.32%	USD firm
Gold	4,298.81	−$104 from prior-day high	Bearish (supply shock + reacting Fed)
Bitcoin	78,888.95	+$2,565 off prior-day low	Recovering
Brent	~$106–108	+3%+	Saudi pipeline shut, Hormuz talks off

Normal session ahead, but a positioning one: the Fed is in its pre-meeting blackout, so there are no US officials to move the needle before Wednesday.

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