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  • Writer's picturen ev

US dollar index bounces off support but the US equities markets dip from ATHs.

Maybe it is a case of end-of-month rebalancing and maybe there is a case for booking some profits when the index hits an all-time high. Whatever the case may be the economic calendar was relatively light today and the trades were on thin holiday volumes. As an example, the last 4 days in the Nasdaq have been on decreasing volume.

Market Wrap

Today was an east-west divide, with the Hang Seng, Nifty 50, Nikkei 225, and Shanghai Stock Exchange ending their days higher, while at the London close the Dow Jones Industrial Average, Nasdaq 100, S&P500, FTSE100, and DAX all traded lower on the day. The moves for the end of the month are relatively small but the day’s trading range on the Nasdaq at least was quite large due to a continuation higher in the overnight session before a hefty dip at the US futures open.

The forex markets were more mixed with the Swissy rebounding after a terrible start to the week and the Aussie and Kiwi also keeping their relative strength from the overnight session through the following London session into the US session. The Canadian dollar bucked the commodity pairs trend as it fell on the back of worsening GDP data.

The Canadian GDP growth rate fell for the 3rd consecutive month but this time into contraction, missing estimates of an 0.6% expansion.

Data from the US today included the Consumer Sentiment Index which came in under analysts' expectations declining to the lowest level since February."Concerns about the Delta variant—and, to a lesser degree, rising gas and food prices—resulted in a less favorable view of current economic conditions and short-term growth prospects," Conference Board's Senior Director of Economic Indicators Lynn Franco commented.

US house prices did however rise at a record pace according to today's Case-Shiller 20-city home price index. Year-over-year readings came in at 19.08%

The US dollar index has bounced off the daily 50 ema and is looking likely to finish the day flat. As it swept the lows of the previous swing low, I am tempted to say that is a bullish signal for now and that the liquidity gathered there would be ideal to start a momentum move for a test towards the recent highs. The 20, 50, and 200 ema are all stacked in a bullish manner so medium-term to long-term direction is still to the upside, but the break of market structure is hinting for a lower high to form.

The price action in the S&P500 shows how the trend is still to the upside and that today even brought in new all-time highs.

The long bonds though have come back down towards the opening prices when Fed Chair Powell delivered his Jackson Hole speech, so it will be interesting to see if these are going to move in tandem for now, or whether the Bonds revert to being a risk-off signal as they go higher, and stock markets come down and vice versa. Currently having the two opposing risk assets moving in lockstep makes it quite hard to gauge the intraday trading direction. Which if you find it also makes no sense, it is probably a signal to step aside for now.

Gold thankfully tested to an old resistance level which has now proven to be support and a breakout to the upside is looking much more likely. If the US dollar were to also drop rather than rising the move in gold would be faster. At present, there are flows into both due to uncertainties around if or when the Fed is actually going to taper and also safe have flows due to the uncertainty around the covid-19 variant which is causing global manufacturing disruptions and dampening sentiment still.


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