USD may be supported by near-term correction of US stock

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wisepowder

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The US dollar index (DXY) rose sharply last week in the wake of a drop. According to a previous dovish talk by the Federal Reserve, it will
maintain a low interest rate for a long time, for which the DXY fell to
91.746, a two-year low, last week. However, the varying degree of
correction in US and global stock markets makes DXY recover from the
bottom up with its hedging function. And the US economic data is indeed
superior to that of other main industrial countries. For example, from
the employment data released by the US last Friday, it is remarkable
that the unemployment data of Europe kept increase, resulting in a
strong contrast with the US.To get more news about WikiFX, you can visit wikifx official website.
In the near term, the US stock may continually affect DXY, that is to
say, the divergence between the US stock and DXY will still be
maintained. Therefore, if the US stock continues making corrections this
week, USD may be supported against all non-USD currencies. It can be
seen from the weekly chart that gold, silver, crude oil, etc, all have
fallen in the wake of the recovery in USD. Among the non-USD currencies,
only CAD survived with a strong trend. So the near-term trend of CAD
seems not to be obvious.
The odds are that the constant correction in global stock markets will
affect the AUD and NZD negatively. On the contrary, the safe haven
currencies like USD and JYP may benefit from it. Therefore, investors
should pay close attention to
CAD and JPY rather than AUD, NZD and EUR this week. In terms of cross
trade, investors should look out for if AUD keeps dropping against
JPY. The reason why EUR is negative this week is that the latest
economic data indicates a slowing economy in Europe, compared with US
economy of high resilience. In addition, European Central Bank official
Philip Lane stated that a strong EUR is expected. And the ECB will hold
the interest rate decision on Thursday. So it worries traders that the
ECB will adopt a dovish measure and even increase the amount of QE
following the steps of the Fed, which explains again its dissatisfaction
with the status of EUR, putting further pressure on EUR and benefiting
DXY directly.
Posted 29 Jan 2021

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