The week of central bank meetings is over and the focus of market participants shifts to the US politics, energy markets, Treasuries sell-off and Eurozone inflation figures. If the US Congress cannot find a way out of the existing dilemma regarding the public debt ceiling, the demand for risk will probably alternate with a flight to quality, and USD may extend this rally on the back of risk-off.

Risk assets started the week on a positive note, except for Nasdaq futures, which went into negative territory due to rotation of investors in falling Treasury bonds. On Monday, the yield on 10-year Treasury bonds continued to rise, which began last week after the Fed meeting, and reached its highest level since the end of June - 1.5%. The past meeting of the Fed showed that the number of FOMC members expecting that the first rate hike will take place next year has risen sharply - from 3 to 9 members. This circumstance forces investors to re-consider the likelihood of the first rate hike in 2022, which hits bonds with longer maturities. In addition, there are technical patterns that pointed to the risks of flight from Treasuries:

Congress needs to agree on a freeze or increase in the public debt ceiling to avoid a government shutdown in mid-October. So far, there are no signs that Senate Republicans are willing to cooperate on this issue, so risk assets may face several more weeks of nervousness. Congress will also discuss a $ 550 billion infrastructure spending package, but the amount of aid, as we can see, is much more modest than originally proposed.

The rise in energy prices is also attracting attention, be it oil, gas or coal. Oil prices are poised to retest yearly highs on the back of strong upside momentum. Extremely high gas prices are forcing consumers to switch to oil, which propels oil prices higher in the short-term. From a technical point of view, a new leg of the price rally can be in its early phase, since on September 10 the price broke correction channel and so far has slightly deviated from key moving averages on the daily timeframe, indicating modest risks of overbought:

Prices are likely to extend gains before the OPEC meeting on October 4, providing support for the currencies of the countries that export oil and gas - the Norwegian krone and the ruble.

A number of Fed officials will speak this week and, judging by their interest rate projections expressed in dot plot, they are likely to advocate the benefits of an early rate hike. At the same time, the situation with Evergrande remains uncertain and the presence of a constraining factor of demand for risk is likely to provide support for the dollar. A retest of the annual high on the DXY (93.50 zone) and an exit to the target of October 2020 - the level of 94.00 is likely.

The first estimate of inflation in the Eurozone for September will appear on Thursday. On Thursday, there will be data on Germany, on Friday - a preliminary estimate for the entire Eurozone. Perhaps the release of inflation data will be the best chance for EURUSD to catch on to the 1.17 level. In addition, the ECB Symposium will be held in Sintra on September 28-29, where the regulator may shed light on plans to reduce asset purchases in December, which in turn may also support the euro.