Pre-Market: US Stocks Under Pressure as Dollar Trades Near 10-Week High
It was a very discouraging Wednesday for stock bulls, as although the market the reasons to rally, all the attempts faded away and the major indices closed near their daily lows. The FED didn’t raise its benchmark rate this time around, and released a slightly dovish statement, while Apple reacted to a rather mixed quarterly earnings report in a bullish fashion in Tuesday, so the catalysts were positive, but the bearish technical setup remained intact.
EUR/USD, 4-Hour Chart Analysis
Today, stock futures failed to bounce substantially again, despite the stability in European equities, which is still largely fueled by the weakness of the common currency. The EUR/USD pair is still below the $1.20 level despite the dovish take on the FED statement, and although a correction in the Dollar could be ahead, the breakout seems legit, and a larger scale move in the Greenback is likely underway.
Dollar Index (DXY), 4-Hour Chart Analysis
The major US indices continue to trade in a bearish short-term trend, as the bulk of the earnings season will soon be behind us, and now the February lows seem very vulnerable from a technical standpoint. The more times a support is tested the more likely it will break, and should the current swing reach the lows, a push below them is likely.
S&P 500 Futures, 4-Hour Chart Analysis
That said, the massive triangle consolidation pattern is intact in the Dow and the S&P 500, and choppy trading could still continue before a significant move outside the formation. With all that in mind, we remain bearish on US equities, and we expect move below the correction lows in the coming period.
Risk-Off Assets Outperform as Yield Curve Flattens Further
While the Dollar was clearly in the center of attention lately, Treasuries continued the most persistent trend in recent month, the flattening of the yield curve. Long-dated Treasuries significantly outperformed the shorter end of the curve, as doubts about the longevity of the current economic cycle strengthened. Today the same dynamic is clearly dominant, as risk-off assets are broadly higher, with the negative sentiment boosting long-dated treasuries together with gold and the Japanese Yen.
GBP/USD, 4-Hour Chart Analysis
European economic numbers continue to disappoint across the board, with especially the British economy showing weakness lately, driving the Pound’s dive all the way to 1.35 against the Dollar, from a recent high above 1.43. While the US economy continues to show modest growth, the synchronized growth narrative is crumbling, and that is driving the re-pricing of the trends of 2017, which could accelerate, as momentum traders switch sides thanks to technical trend changes.
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