At first glance, the idea seems simple. If a market becomes “overbought”, a pullback should follow. That assumption usually comes from RSI, where readings above 70 are often interpreted as a warning that prices may have moved too far, too quickly.
Financial markets are not only driven by economic data. They are also constantly pricing uncertainty. This is where the idea of the global risk premium comes in. In simple terms, it is the extra return investors expect for taking on risk in an uncertain world. When uncertainty rises, that required return increases, and the impact is often felt across equities, bonds, currencies and commodities at the same time.
Markets entered the week trading largely on the geopolitical narrative surrounding the Middle East, with investors focused on whether tensions between the US and Iran would evolve into a prolonged disruption of global energy flows. Oil prices had surged in the previous week as markets priced a higher probability of supply interruptions through the Strait of Hormuz, raising concerns that a renewed energy shock could reinforce inflation pressures just as central banks were attempting to stabilise financial conditions.
In cryptocurrency markets, Bitcoin often sets the overall direction, but Ethereum frequently plays an important role in signalling shifts in investor sentiment. While Bitcoin is widely viewed as the anchor of the crypto ecosystem, Ethereum tends to gain momentum when risk appetite strengthens across the market.
Nominal interest rates often dominate financial headlines. Investors frequently hear about central bank policy rates or the yield on government bonds such as the 10-year US Treasury. However, in financial markets it is often the real interest rate that matters more.
