US Dollar Talking Points:
- Global equities have finally found some semblance of support after a brutal two-day sell-off. There did not appear to be a singular driver behind the selling, and this perhaps helped to soften the blow a bit; and when taken with the fact that Q3 was a very bullish period for stocks in the US, it becomes easier to qualify this move as a simple correction as opposed to a harbinger of doom as we wind down 2018. Nonetheless, the sell-off happened, and until markets see a convincing return of bullish price action, caution should be utilized across the equity space.
- For all intents and purposes, currencies were relatively calm during this equity rout. There were consistent patterns of weakness in the US Dollar and this drove strength into both EUR/USD and GBP/USD but, nothing appeared out of the norm as all three of those markets were working within the context of prior price action.
GLOBAL EQUITIES CATCH SUPPORT, BUT CAN IT HOLD?
This week has brought an interesting twist as a global stock sell-off caught many by surprise; and this follows what was a very bullish Q3 across a number of indices. The move was very pronounced during Wednesday’s US session, and that pain held through the Asian open. Support began to show in the Dow and S&P and that largely held through yesterday’s European and US opens, with another fresh wave of selling showing up near yesterday’s US close. The Dow quickly moved down to test the 25,000 level and a bounce began to show. Buyers continued to drive overnight, and at this point, we can see prices attempting to hold higher-low support around the 61.8% Fibonacci retracement of the January sell-off in the index.
DOW JONES HOURLY PRICE CHART: ATTEMPTED BUILD OF SUPPORT AFTER 25K TEST
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