Technical Outlook:

  • US Dollar Index (DXY) coming off trend support
  • S&P 500 turn down was unusually strong for a correction

The US Dollar Index (DXY) shot higher yesterday as risk-off gripped risky assets amidst renewed uncertainty with the coronavirus and the economic outlook. The bounce is coming off a trend-line running higher since 2018, and if the momentum is any indication the bounce could quickly morph into a rally. Look for the 95.72 low to hold for more upside towards the 200-day MA and higher to develop. A break below the low and trend-line will put even more pressure on the Dollar, with DXY 94.65 eyed as the next level of support.

US Dollar Index (DXY) Daily Chart (coming off trend support)

DXY daily chart

DXY Chart by TradingView

The S&P 500 got crushed yesterday. It was the type of turn after a rally that suggests that there is more from where that came from. The SPX closed the day below the 200-day and will begin today trading just above it; watch how this tug-of-war plays out. The thinking is we will see more weakness in the week ahead, with potential for a move to the May 14 low in the cards in the not-too-distant future. If the market can manage to stabilize and turn higher quickly, it is possible it was a one-off event, but that doesn’t look very likely at this time.

S&P 500 Daily Chart (sharp turn likely means more selling)

S&P 500 daily chart

S&P 500 Chart by TradingView

For all the charts we looked at, check out the video above…

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—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

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