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

  • Jan 29
    The 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.

    In 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.

      The 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.