DXY rallies for a (rare) 6th day, potential bullish flag on GBP/AUD
It’s been a decent week for the dollar, but there is potential for mean reversion as we head into the weekend with 100 resistance looming.
U.S. cash market close Thursday:
- The Dow Jones Industrial rose 87.06 points (0.25%) to close at 34,583.57
- The S&P 500 index rose 19.06 points (2.51%) to close at 34,058.75
- The Nasdaq 100 index rose 32.925 points (0.23%) to close at 14,531.81
Asian Futures Contracts:
- Australian futures on the ASX 200 are down 0 points (-0.64%), the spot market is currently estimated at 7,442.80
- Japan’s Nikkei 225 futures are up 130 points (0.48%), the spot market is currently estimated at 27,018.57
- Hong Kong Hang Seng futures are down -62 points (-0.28%), spot market is currently estimated at 21,746.98
- China A50 index futures are up 5 points (0.04%), the spot market is currently estimated at 13,856.08
Initial jobless claims in the United States fell to a 53-year low of 166 last week, meaning an already tight labor market is tightening. Labor shortages help to partly explain the decent impression, although it should be taken into account that the calculation of seasonality has been modified.
Bullish outside days formed on the Dow Jones and S&P 500, with the latter holding above support at 4455. 54% of S&P stocks rose, not exactly a bullish day, although 8 of its 11 sectors posted gains, led by health care and energy.
- +11.9% – Magellan Financial Group Ltd (MFG.AX)
- +9.68% – GQG Partners Inc (GQG.AX)
- +4.88% – Zimplats Holdings Ltd (ZIM.AX)
- -6.67% – Liontown Resources Ltd (LTR.AX)
- -6.55% – WiseTech Global Ltd (WTC.AX)
- -6.36% – Novonix Ltd (NVX.AX)
The USD is the strongest currency this week
The US dollar rallied for six consecutive days, the euro fell for six days, the Swiss franc and the Japanese yen five. And all because the Fed hammered home a point that we thought was already generally accepted; the Fed will aggressively raise rates and start shrinking its balance sheet. As for the US Dollar Index, 6 bullish closes are quite rare and we are now heading towards 100. So there is potential for mean reversion, either side of this weekend. .
Potential bullish flag on GBP/AUD
A potential bullish flag is forming on the GBP/AUD hourly chart. The daily pivot point sits at 1.7455 and the 23.6% Fibonacci retracement at 1.7432 makes this a potential support zone. If successful, the flag projects a target around 1.7750 but we are happy to focus on more conservative targets heading into the weekend. The daily R1 and R2 lie at 1.7530 and 1.7585, and with the weekly R1 pivot just above the swing highs, 1.7600 is a potentially achievable target in the European or US session.
WTI hits target but key support holds (for now)
WTI reached our lower target of 94.0 yesterday after respecting the rebound higher from our resistance zone near 99.0. Since then, prices have recouped about half of yesterday’s losses over the past four hours and given the importance of support around 94.0, we are happy to maintain a flat view heading into the week. -end, as prices are now trapped between the key levels of 94 – 99. Should a big event trigger a breakout of either of these key levels, our bias would shift in the appropriate direction. Alternatively, traders could consider range trading strategies (short to resistance, long around support) until that range breaks.
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