As risk aversion kicked in, global stocks have eased on Tuesday while the safe-haven dollar extended the bounce from two-month lows seen last week. The greenback derived support from the rising yields.
During the technical breakout, the 10-Year US Treasury yields hit 1.85%, the highest level since January 2020. Now that yields exceeded the 200-DMA, December 2019 highs in the 1.96% area could get back into the market focus.
The rally in yields puts equities under further pressure, with US stock index futures pointing to a decline ahead of the opening bell. Nasdaq 100 Futures are down nearly 1% and S&P 500 Futures are shedding 0.5%.
Investors continue to bet on a March rate hike by the Fed. The FOMC meeting is due next week, so the dollar could add to recent gains ahead of the event, especially as the US currency looks attractive for buyers at the current levels.
As the greenback climbs, gold prices are back on the defensive, extending the retreat from the $1,830 local resistance amid the ascent in Treasury yields.
The precious metal could derail the 20-DMA, currently at $1,809, should the risk-off tone continue to lift demand for the USD. In this scenario, gold may retarget the $1,800 psychological level last seen one week ago.
On the oil front, Brent crude peaked at October 2014 highs just above the $88 figure earlier in the day. However, the futures failed to preserve gains and retreated marginally in recent trading, in part pressured by the dollar bulls.
Still, oil prices stay elevated and could see more gains in the near term before shifting into a corrective mode amid the overbought conditions. The latest driver behind the rally was the escalating geopolitical conflict.
In particular, Yemen's Houthi group attacked the United Arab Emirates and warned it could target more facilities. Later in the day, the API report could affect short-term dynamics in the market.