Daily Analysis: Dollar Jumps, Stocks Reverse Gains, as Yields Rise Again

Tuesday Market Recap

Asset Current Value Daily Change
S&P 500 2746 -1.28%
DAX 12,490 -0.29%
WTI Crude Oil 62.81 -1.72%
GOLD 1319.00 -0.99%
Bitcoin 10,769 3.58%
EUR/USD 1.2231 -0.70%

US stocks experienced a significant reversal today after three days of relentless buying, with Jerome Powell’s first testimony as a Fed Chair triggering the move. The new leader of the central bank had several important remarks, and a few crucial things that were missing from his narrative, compared to Janet Yellen’s views.

Most importantly he dismissed the role of market volatility in the Fed’s decision making, while also admitting the negative effects of low-interest rates for savers. While that’s not a revolutionary discovery, rather common sense, it still represents a breath of fresh air in the desert of cluelessness among the leading central bankers. We have to wait and see how this translates to actual decisions by the Fed, but in theory, this shift should cement the uptrend in yields, at least as long as the economy is growing.

Dow Futures, 4-Hour Chart Analysis

Stocks, which were led higher by the Nasdaq in recent days, turned lower after the tech benchmark breached the 7000 level, and all of the major US indices finished more than 1% lower. The Dow and the S&P 500 already got back to the key technical levels that we have been monitoring throughout the bounce, but the Nasdaq remains clearly the strongest benchmarks, with the help of the usual suspects, Amazon and Apple.

Amazon (AMZN), 4-Hour Chart Analysis

We remained defensive ever since the major indices reached the strong resistance levels, despite the surprisingly strong recovery, and we still enter March with a bearish short-term outlook. The divergences among risk-on assets not just persisted, but even strengthened on the way up, and that reassures our defensive stance here.

Forex Markets Dominated by the Dollar

EUR/USD, 4-Hour Chart Analysis

As rate hike odds rose after Mr. Powell’s testimony, Treasury yields climbed higher across the board, and as we noted previously, in the new post-crash regime that helped the Dollar, which gained ground against all of its major peers. The safe-haven Yen edged higher in late trading, amid the decline in stocks, but the Euro is trading near its recent lows compared to the Greenback.

USD/CAD, 4-Hour Chart Analysis

Commodity-currencies continued to lead the market lower, with the Australian Dollar and the Canadian Dollar both being smashed lower, as both gold and crude oil finished substantially lower, with the precious metal showing some late strength amid the risk-off shift.

Cryptocurrencies

All eyes were on Bitcoin in Crypto-Land yet again, as the most valuable coin is back in the forefront of the recovery, confirming a swing low as expected, and it is likely heading towards the $11,300 level in the coming days.

BTC/USD, 4-Hour Chart Analysis

As the bullish rotation continues in the segment, the recently strong Ethereum is consolidating just below the declining trendline, with Liteocin and Ethereum Classic also gathering strength, while NEO, Monero, and IOTA are showing signs of strength. Despite the fact that several coins are lagging behind, the overall price action remains clearly bullish in the segment.

Featured image from Shutterstock

Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.