Pre-Market Analysis and Chartbook: Dollar Surges as European Stocks Plunge

Friday Market Snapshot

Asset Current Value Daily Change
S&P 500 2,913 -0.23%
DAX 30 12,230 -1.66%
WTI Crude Oil 72,11 -0.01%
GOLD 1,190 0.24%
Bitcoin 6,619 1.61%
EUR/USD 1.1588 -0.46%

While the week has been encouraging up until now in European and emerging market equities, which finally rose together with US stocks, today, Europe erased a large chunk of the recent gains. The controversy surrounding the Italian budget, which is deemed to defy the EU’s demands, weighs heavily on local equities and the Euro alike. The major US indices also opened in the red, but compared to the almost 2% losses in Europe, their decline is meager.

DAX 30 Index CFD, 4-Hour Chart Analysis

The DAX is down by almost 250 points, ending the brief period of relative strength, and the index is now back below the declining short-term trendline, pointing to a failed break-out and a continuation of the broader downtrend. The weakness in the Euro is not enough to lift the benchmark, as selling pressure has been very strong today, augmented by the technical breakdown as well. Now, a test of the 12,000 level looks likely again, barring a quick reversal above the trendline.

EUR/USD, 4-Hour Chart Analysis

The EUR/USD pair has been in the center of attention ever since the FED’s rate decision and despite the bullish initial reaction, the common currency is now trading at a two week low against the Greenback, threatening to continue the broader downtrend, which has been one of the main triggers of the emerging market crisis. With that in mind, today’s moves are very important for global risk assets, and a move below the key support/resistance zone near 1.15 would be a bearish sign.

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Dollar Strength to Have Broader Implications

Emerging markets are still clearly trading in a steeply declining trend, despite the rally of the recent weeks, and although the lows are still well below the current levels, as measured by the EEM ETF, the lack of strong bullish momentum is a warning that the storm still hasn’t passed for good in the segment. Should the Dollar show more strength, coupled with still rising US Treasury yields, the pressure could be back on the most vulnerable countries.

Copper Futures, 4-Hour Chart Analysis

Commodities are generally higher so far today, with gold, crude oil, and copper all sporting gains, but both copper and gold are well below their pre-Fed levels, and the Dollar’s strength will likely put further pressure on them. Copper is still well above the key support zone just north of the $2.7 level, leaving the short-term uptrend intact, even as the move wasn’t enough to break the broader declining trend. The next week could be crucial for the industrial metal and the Chinese stock market as well, since it has been tightly correlated with Dr. Copper lately.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Nasdaq 100 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

Forex

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Gold Futures, 4-Hour Chart Analysis

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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.