Keeping U.S. Dollar Long Positions Would Be the Best Idea
The stock market in the United States went into correction after peaking all-time highs on the S&P 500 broad market index at 4818.62 points and Dow Jones – at 36952.53 points. The correction seems to be justified as many divergences are seen on some oscillators and are amid profit taking on all-time highs.
We may hardly see stock indices on new all-time highs this week as it seems to be uneasy. This week the first quarterly corporate reports will be released for Wells Fargo, Citigroup, and JPMorgan. Investors should also pay attention to CPI data from the United States that will be released this Wednesday and is expected to deliver a new record at 7.0% year-on-year, the highest since 1982. Record inflation data may push the U.S. Dollar index (DXY) and force 10-year U.S. Treasuries yields to climb. The weekly and daily technical picture supports the idea of the continuous upward move of the DXY as the index has remained in an upward trend since May 2021. Moreover, the last upside wave of the index from 93.265 to 96.940 was corrected only by 38.2% and this indicates the upward trend is likely to remain intact.
We may also confirm it by looking at the resistance line connecting DXY peaks from November 2021, and the support line that connects the lows of November 30 and December 31. In this case a triangle pattern can be seen which is more like a pennant pattern. This pattern points to a continuation of the existing trend, and this will be confirmed after the 96.35 points resistance level has been passed. In this case, the index may gain up to 98.60 points, or even to 100 points.
The Federal Reserve’s (Fed) Chairman Jerome Powell is expected to testify before the U.S. Senate Banking committee on Tuesday to seek approval for the next term. Mr. Powell is expected to reiterate the Fed’s hawkish monetary policy to tackle inflation as the omicron variant is putting some extra pressure on the U.S. and the global economy. So, long positions on the U.S. Dollar may look like the best hedge from possible excessive volatility in the stock markets as they are seen to be overheated.
We may hardly see stock indices on new all-time highs this week as it seems to be uneasy. This week the first quarterly corporate reports will be released for Wells Fargo, Citigroup, and JPMorgan. Investors should also pay attention to CPI data from the United States that will be released this Wednesday and is expected to deliver a new record at 7.0% year-on-year, the highest since 1982. Record inflation data may push the U.S. Dollar index (DXY) and force 10-year U.S. Treasuries yields to climb. The weekly and daily technical picture supports the idea of the continuous upward move of the DXY as the index has remained in an upward trend since May 2021. Moreover, the last upside wave of the index from 93.265 to 96.940 was corrected only by 38.2% and this indicates the upward trend is likely to remain intact.
We may also confirm it by looking at the resistance line connecting DXY peaks from November 2021, and the support line that connects the lows of November 30 and December 31. In this case a triangle pattern can be seen which is more like a pennant pattern. This pattern points to a continuation of the existing trend, and this will be confirmed after the 96.35 points resistance level has been passed. In this case, the index may gain up to 98.60 points, or even to 100 points.
The Federal Reserve’s (Fed) Chairman Jerome Powell is expected to testify before the U.S. Senate Banking committee on Tuesday to seek approval for the next term. Mr. Powell is expected to reiterate the Fed’s hawkish monetary policy to tackle inflation as the omicron variant is putting some extra pressure on the U.S. and the global economy. So, long positions on the U.S. Dollar may look like the best hedge from possible excessive volatility in the stock markets as they are seen to be overheated.
