The dollar is increasing putting pressure on stock market rally

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Monday was a tough day for financial markets. American DJI lost more than 2.3%, the S&P500 declined by 2.0%. As in previous weeks, the main pressure was put on the promotion of high-tech companies. In the process flow of investors from “growth stocks” in the income shares, on them fell the brunt. Not complete without bad news. For example, the decline of Apple by 5%, partly there are analysts who believe in the imminent and sudden start of sales.
Thus, again increased the demand for dollars as a protective asset, which further “stoked” stock. The dollar index gained on Monday 0.8%, hitting a new highs since the middle of last year.
This morning, the dollar stayed away from local extrema, but such a sharp move on Monday suggests strong support from the bulls.
The single currency yesterday, the dollar lost 0.9% while staying one step away from 1.1200 after the Makron that the Euro is not yet a substitute for the dollar due to political problems. As a graphic illustration of these words – the confrontation between Italy and the European Commission around the budget deficit. The dollar could continue to support markets, going beyond previous resistance area. Now the focus of the markets may be following the extrema of the index of about 103. For the single currency, the preservation of alertness around Italy, combined with increased demand for the dollar adjusts to the movement of below 1.10.
The tense tone of trading on Asian markets this morning gave way to a more positive. The growth was driven by hopes for successful negotiations between China and the United States. In addition, it is worth noting the sharp reversal of quotes to the yuan upwards. In the previous month the people’s Bank of China has actively intervened in the foreign exchange market, protecting the course from the decline, although this did not prevent USDCNH to creep higher and higher.
In November, we have already seen some sharp rollbacks pair associated with positive news from China. However, the magnitude of the decline suggests that it is also cost intervention by the NBK. However, such interventions do not fundamentally change sentiment in the markets, and moments of growth should be a quick return to the fundamental trend.
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Alexander Kuptsikevich,
Analyst
FxPro