The USD fell for the 2nd day in a row and the 5th day in the last 6 trading days.
The dollar index (DXY) is down nearly 4% this week, with all major currencies advancing against the greenback. The decline is the largest % drop since March 2009. Thursday’s better than expected CPI was a catalyst for the sharp decline, especially over the past 2 trading days.
The USD fell this week:
- -5.46% against the yen
- -5.37% against the CHF
- -4.07% against GBP
- -3.97% against the euro
- -3.65% against the AUD
- -3.19% against NZD
- -1.67% against the CAD
Since the most recent high 7 trading days ago, the DXY is down -5.96%.
For 2022, the USD is still up 11.22% but far from the 19.97% gain at the index high on September 28.
The rising dollar has been a headwind for US earnings in 2022. This has led to expectations of slower earnings growth going forward. However, this week’s sharp decline has turned fortunes and expectations upside down a bit (more on that later in the post).
Technically, this week the DXY has fallen below its 100-day MA at 109.056 and below the 38.2% of the 2022 trading range, but remains above the 50% midpoint and the MA. of 200 days which are both at 104.86. A test of this zone would represent a further decline of -1.46% and give buyers and sellers a key level-defining bias going forward. Stay above and the lower correction is within the normal corrective targets. Move lower and the bias begins to tilt more in favor of the sellers (if the price can stay below).
Be aware of the double technical level near 104.86 going forward.
The decline in the USD this week led to a sharp rise in US stocks as investors suddenly saw tailwinds due to the weaker dollar.
The Nasdaq index benefited the most with a gain of 8% over the week. The S&P rose 5.9% and tested natural resistance at 4,000 before falling slightly at the close. The leading Dow rose 4.15% this week (see article here).
The better CPI was also a catalyst for lower rates this week. The bond market was closed today on Veterans Day. For the trading week:
- 2-year yield closed at 4.349%, -31.4 basis points
- 5-year yield closed at 3.96%, -37.4 basis points
- 10-year yield closed at 325%, -31.3 basis points
- 30-year yield closed at 4.04%, -21 basis points
Bitcoin and other digital currencies struggled this week following the bankruptcy of exchange firm FTX. More mistrust has entered the digital currency space which cannot be resolved without increased regulation
For the trading week:
- Bitcoin is trading down -20%
- Ethereum is down -23.8%
- Dogecoin is down -28.2%
- FTT digital token for FTX is trading down -89.8%
Thank you for your support this week. Hope you have a safe and fun weekend.