Dollar pulls back off fresh 20-year highs as market prices in a more hawkish ECB.
Dollar Index
Monday’s London session proved to be a battleground won by the Dollar as it added to Friday’s gains, hitting levels last traded in September 2002. A Key driver in this exuberance is the ever-increasing probability of a 75-basis point rate hike as opposed to a 50-basis point rate hike at the next FED meeting in September. This in turn has caused yields to rise, with the 2-year yield hitting fresh 5-year highs near 3.5% and ultimately gave the dollar its appeal to continue its upward trajectory.
Technical Analysis: H4
In terms of market structure, last week saw the completion of the larger bullish continuation pattern in the form of the falling wedge type structure that found support from the 104.00 level and produced an impulsive wave that went on to revisit the 109.00 area last week Friday before setting a new high just under 109.50.
Intra-day Overview: Current price action in Monday’s trading session broke through the previous high and created fresh 20-year highs before retreating into the range finding support within the 108.00 range. Henceforth buyers could push the index to continue its bull run, or on the flipside, sellers could be well positioned at the fresh 20-year highs set in Monday morning’s London session and could challenge buy pressure.
Stocks
At the time of writing, US Stocks have continued to sell off since Friday’s hawkish comments signalled a longer period of sustained higher interest rates.
- Dow Jones: Reacted by adding to the losses from last week by 0.07%.
- S&P 500: Pressure continued and added to losses from last week by 0.11%.
- Nasdaq: Was down on Monday by 0.49%.
Currencies
Euro:
- Intraday overview: Price was buoyed by a pullback in the Dollar on Monday morning, which gave the Euro some impetus to claw back some of the losses made on Friday, retesting the upper end of the range at the 1.00291 area in the current bearish continuation structure.
Pound:
- Intraday overview: The 1.16481 area was the floor that supported a pullback on Monday morning, as the Pound clawed back some of the losses from Friday. The Intraday high was set around the 1.17432 area.
Commodities
Gold:
- Intraday overview: The $1 720 area was the floor that supported a pullback on Monday morning, helping Gold claw back some of the losses seen on Friday. The intraday high was set around $1 745.
Oil:
- Overview: On the back of the Saudis’ comments around their inclination towards slowing down production, the price of Brent hit $100 and shows the possibility of geopolitical factors supporting the bullish momentum for now, while the current economic outlook, and central banks’ monetary policies, are supporting a bearish sentiment.
Bitcoin
In the wake of Bitcoin falling below the psychological $20 000 level, there could be more support around the corner as crypto adoption seems to be getting “a shot in the arm” with the Monetary Authority of Singapore considering implementing certain regulations around leverage when it comes to cryptocurrencies. This initiative is aimed to protect inexperienced consumers as opposed to banning the crypto market altogether.
Economic Calendar
Source: Investing.com
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Ofentse Waisi
Market Analyst
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