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USD may be supported by near-term correction of US stock

  • September 19, 2020
    USD may be supported by near-term correction of US stock

    US dollar index (DXY) rose sharply last week in the wake of a drop.
    According to a previous dovish talk by the Federal Reserve, it will
    maintain a low interest rate for a long time, for which the DXY fell to
    91.746, a two-year low, last week. However, the varying degree of
    correction in US and global stock markets makes DXY recover from the
    bottom up with its hedging function. And the US economic data is indeed
    superior to that of other main industrial countries. For example, from
    the employment data released by the US last Friday, it is remarkable
    that the unemployment data of Europe kept increase, resulting in a
    strong contrast with the US.To get more news about WikiFX, you can visit wikifx official website.

    the near term, the US stock may continually affect DXY, that is to say,
    the divergence between the US stock and DXY will still be maintained.
    Therefore, if the US stock continues making corrections this week, USD
    may be supported against all non-USD currencies. It can be seen from the
    weekly chart that gold, silver, crude oil, etc, all have fallen in the
    wake of the recovery in USD. Among the non-USD currencies, only CAD
    survived with a strong trend. So the near-term trend of CAD seems not to
    be obvious.

    odds are that the constant correction in global stock markets will
    affect the AUD and NZD negatively. On the contrary, the safe haven
    currencies like USD and JYP may benefit from it. Therefore, investors
    should pay close attention to

      CAD and JPY rather than AUD, NZD
    and EUR this week. In terms of cross trade, investors should look out
    for if AUD keeps dropping against JPY.
    The reason why EUR is negative
    this week is that the latest economic data indicates a slowing economy
    in Europe, compared with US economy of high resilience. In addition,
    European Central Bank official Philip Lane stated that a strong EUR is
    expected. And the ECB will hold the interest rate decision on Thursday.
    So it worries traders that the ECB will adopt a dovish measure and even
    increase the amount of QE following the steps of the Fed, which explains
    again its dissatisfaction with the status of EUR, putting further
    pressure on EUR and benefiting DXY directly.