US Dollar favored due to global risk concerns

By TradeRadius | Mon, 14 Aug 2023 10:18:24 UTC

img for post
  • The US Dollar paints a risk-off picture at the start of the week. 
  • China's economic numbers paint a bleak picture of its post-covid recovery.  
  • US Dollar Index to print fresh monthly high again.

The US Dollar (USD) continues where it left off Friday evening at the US closing bell. The Greenback-favored sentiment this Monday is built on the once again disappointing numbers out of China. With Country Garden, an even bigger real estate developer than Evergrande, on the brink of collapse, Chinese loan data pointed to an 89% drop in distributed loans to companies and households. The Chinese credit crunch will further deteriorate its economic numbers and growth, threatening world economic growth in a spillover effect. 

There are no important data points for Monday and the rest of the week. On Tuesday, US retail sales numbers will flavor the market, and on Wednesday the latest US Federal Reserve Minutes will be key data for further guidance and clues on where the US Dollar Index (DXY) might move later this week. Without pivotal data points, expect markets to be on autopilot with no real seismic shifts in current trends.

Daily digest: US Dollar picking up

  • Main headlines this Monday are on the Chinese property builder Country Garden., which is on the brink of a default and might need financial aid from the Chinese government.
  • Chinese loan distribution to companies and households dropped 89% for the month of July against June’s numbers. Loans are a vital item in an economy for companies that want to expand and for household consumption.
  • Forex markets are also gearing up for a shock intervention by the Japanese finance ministry as USD/JPY has hit 145 in early Monday trading. An intervention could see heavy US Dollar selling to get the USD/JPY exchange rate back down to 140 or 135 in a short period. In Japan, it is not the central bank but the finance ministry overseeing the exchange rate positioning.
  • The US Treasury will tap the market for a 3-month and 6-month bill auction.
  • Asian stocks are being slaughtered on Monday, with the Japanese TOPIX index down 1% at its closing bell. Hong Kong’s Hang Seng is down over 2%, in turn dragging European equities lower. US equity futures are in the red, though marginally by roughly 0.15%. A late recovery is still more than possible later this Monday.
  • The CME Group FedWatch Tool shows that markets are pricing in an 88.5% chance that the Federal Reserve will pause interest rate hikes at its meeting in September. The probability declined from above 90% last week as sticky inflation could mean the Fed might need to keep rates elevated for longer.
  • The benchmark 10-year US Treasury bond yield trades at 4.16% after the summary from last week’s US inflation data was that inflation is slowing down, though it remains sticky. This confirms that the US Federal Reserve (Fed) is right to hold rates steady for longer, while markets got it wrong with their presumed cuts in early 2024.

US Dollar Index technical analysis: low-hanging fruit

The US Dollar continues its rally from last week and opens the week with gains against most major peers. The US Dollar Index (DXY) is increasing, printing another new monthly high. Special attention from a technical point of view for EUR/USD where the US Dollar is about to break both the 55-day and the 100-day Simple Moving Average and could see US Dollar strength helping the DXY to break a substantial cap on the upside. 

For the upside, 103 as a big figure will be challenged today. A touch further up, the 200-day SMA at 103.37 will be a difficult cap to cross above. As no real big events are scheduled for this week, and already the DXY has printed a new monthly high this Monday morning, it is questionable if this sentiment-driven move will push the DXY above the important 200-day SMA.    

On the downside, several levels will be tested regarding support. The first candidate is the high of Friday at 102.90. If that fails, look for 102.38 with the 55-day SMA and the 100-day SMA nearby as double belts for underpinning the price action in the US Dollar Index. Should some event or headline trigger a break-even below those two moving averages, expect to see 102 challenged to catch the falling price action.

Share

Partners News

Bowman, Innovation in the Financial System

It is a pleasure to be back in Salzburg again for the next chapter in the Global Seminar, focusing on financial technology innovations and the developing financial regulatory framework.1 At this same gathering last year, we discussed the potential evolution of the bank regulatory framework in...

By TradeRadius | 1 Minutes Ago

> >

Stocks Week Ahead: Is the Economy Slowing Too Fast? Key Data to Watch for Clues

This will be a quiet week with very little data and a day off mid-week. The data will come on Tuesday; Tuesday will also be Opex; Wednesday, the markets will be closed, and Friday will be quarterly OPEX.

By TradeRadius | 1 Minutes Ago

> >

China's nuclear stockpile is growing faster than any other nation, says new security report

June 17 (UPI) -- China's nuclear arsenal increased by nearly 100 warheads over the last year, according to a new report published Monday that warned it expects Beijing's stockpile to keep growing at a faster rate than any other nation.

By TradeRadius | 14 Minutes Ago

> >

1 Stock to Buy, 1 Stock to Sell This Week: Hewlett Packard Enterprise, Kroger

U.S. stocks ended mixed on Friday, with the scoring its fifth straight record closing high as investors continued to assess when the Federal Reserve might begin cutting interest rates. For the week, the tech-heavy Nasdaq jumped 3.2%, the benchmark rose 1.6%, while the blue-chip declined 0.5%.

By TradeRadius | 45 Minutes Ago

> >

Stocks to Open Lower: Will They Close Lower Too?

Friday’s trading session is likely to open lower, with the expected to dip by 0.6% following Wednesday’s record-breaking rally and Thursday’s consolidation. Yesterday, the index gained 0.23%, remaining close to its new record high of 5,447.25, which was reached on Wednesday after a lower...

By TradeRadius | 45 Minutes Ago

> >

3 Market Indicators Suggesting Bullish Resilience Is Here to Stay

The stock market may be a complex beast, brimming with information and conflicting opinions, but one thing's clear: it has been on a tear. The has been setting new all-time highs, extending its winning streak to six weeks.

By TradeRadius | 45 Minutes Ago

> >

Nasdaq 100: Key Support Levels to Watch for a Long Entry Amid Pullback

This week's 'Super Wednesday' brought a double dose of market-moving news: cooler-than-expected data and the Federal Reserve's , and the eventual . The Fed held steady, keeping both rates and its hawkish rhetoric unchanged. However, the lower inflation reading proved to be a welcome surprise...

By TradeRadius | 45 Minutes Ago

> >

Exploration Stage Mining Stocks Offer No Leverage to Metal Prices

The purpose of this piece is to address the misconception that the stocks of small, exploration-stage mining companies offer leveraged exposure to changes in metal prices. The reality is that they offer zero leverage to changes in metal prices. What they offer is leverage to changes in the...

By TradeRadius | 45 Minutes Ago

> >

S&P 500, Nasdaq Could Close Breakout Gap; Dow Remains Least Risky Bullish Bet

Markets have been a bit of a mixed bag from markets since my last . The closed with a neutral setup. Yesterday's close finished within yesterday's range, but the candlestick was a little more bearish. Watch for a closure of the breakout gap, as happened with the .

By TradeRadius | 45 Minutes Ago

> >

Widening Credit Spreads in Europe Threaten Stocks at All-Time Highs

Stocks finished mostly lower on the day, with 313 stocks on the trading lower and just 185 trading higher. You would never know that from looking at the index that finished the day up by 23 bps, thanks mainly to Broadcom (NASDAQ:), and get this: Nvidia (NASDAQ:). Shocker.

By TradeRadius | 45 Minutes Ago

> >