The US Dollar Basket index continues to act as a backbone for the rest of the financial markets. The potential triple bottom pattern continues to gain momentum with a short-term pullback generating buying pressure on Monday night as global investors bought lower.
The breakout of the trendline on the daily chart occurred on the 18the June and coincided with the RSI breaking of 70. A short-term pullback was therefore not surprising. Events at the end of this week also included the US Federal Reserve saying it “was talking, talking about interest rate hikes.”
With technical and fundamental influences so well aligned, the only surprise is that the setback hasn’t been any greater than it was. A kiss from the trendline still cannot be ruled out, but with the daily RSI returning below 70, the path of least resistance appears to be on the upside.
The key graphical resistance is 9346, the high of the 30e of March, which is always the peak of the year. Daily moving averages point to new upward momentum. The price is currently above the daily 20, 50 and 100 SMAs, and the impending intersection of the 50 through the 20 will add to the list of positive indicators that are accumulating behind the USD price spike.
GBP, EUR and AUD all lost ground against the US dollar. The relatively large movement of the Australian currency is caused by concerns over Covid and news that the Delta variant has crossed the country’s impressive public health shield, to date.
The inverse correlation between the USD and the price of gold and silver also came into play overnight. Silver has slipped below the critical 2600 price level, and both metals have lost 50 basis points since Monday’s close. Palladium and platinum suffered even more severe losses than that.
Tuesday’s big gainer from the strength of the dollar was the FTSE 100. The index lost ground on Monday but rebounded overnight. Time will tell if the long wicks at the upper end of the hourly candles turn out to be as bearish as they appear at first glance. If the USD continues to show strength against the British pound, the UK benchmark stock index should continue to rise. The negative correlation between the GBPUSD and the price of the FTSE 100 is based on the fact that so many constituent companies are making profits in non-GBP denominated markets.
Nasdaq 100 and Facebook
With the dollar prevailing over much of the currency, commodity, and equity markets, it was up to the Nasdaq 100 to provide the exception to the rule.
The index rose nearly 1% as antitrust activists failed to take Facebook to US courts. Two rulings in favor of the social media giant mean it won’t have to sell any assets. As a result, the stock rose 4% and recorded a market cap of $ 1 billion for the first time in its history.
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