After an impressive offensive in the previous few days, the dollar is declining today. Dollar buyers are partially taking profits in long positions on it, and major US stock indices are correcting, trying to push off from key long-term support levels, thereby attempting to return to the multi-year bull market zone.
In particular, the broad market index S&P 500 (reflected as CFD #SPX in the trading terminal) at the time of publication of this article is trading near the 3,690.00 mark, through which the 200-period moving average passes on the weekly chart of the index. A breakdown of this support level and a further decline will significantly increase the risks of breaking the long-term bullish trend of the S&P 500 and, perhaps, of the entire US stock market.
Whatever one may say, the United States is currently experiencing the highest inflation in 30 years. The US GDP has been declining for two quarters in a row, hinting at a recession, the Fed is pursuing a cycle of super-tight monetary policy, and there is a high geopolitical tension in the world. In such a situation, as they say, there is no time for profit and risky transactions; to stay at least with your own or not incur more significant losses.
At the same time, the dollar index (DXY) is falling today after hitting a new local high since April 2002 at 114.41 on Monday.
As of writing, DXY futures (reflected as CFD #USDX in the MT4 trading terminal) are trading near 113.55.
The dollar's upside momentum continues, pushing the DXY to new highs on its way to over 20-year highs near 120.00, 121.00. The breakdown of yesterday's local high at 114.41 will be a confirmation signal for our assumption.
At the moment, market participants have somewhat suspended their activity in the market in anticipation of the speeches (at 11:30 GMT) by the heads of the Fed and the ECB.
A little later (at 12:30 GMT), the US Census Bureau's most important report will be published with data on orders for durable goods and capital goods (excluding defense and aviation), which imply large investments in their production.
A slowdown in the production of such products and a relative decline in indicators are expected, which may provoke a weakening of the dollar. Data worse than the previous value and/or forecast will usually have a negative impact on the dollar quotes, while data better than the forecast will have a positive impact on the dollar. We also note that the level of influence on the markets of this publication is high.