Intraday Market Thoughts

DXY Tests Key Levels

by Adam Button
Mar 24, 2021 17:43

As the US dollar index (DXY) reaches its 200-DMA for the 1st time since May of last year and EURUSD breaks below its own 200-DMA, traders ought to watch these key levels for a possible breakout(down). That is expecially the case if oil makes a fresh descent under 58.00. Below is the latest Premium video, highlighting what to watch for in oil and how this market could assume leadership of influence from bond yields. 

Wednesday saw another divergence between DOW30 and NASDAQ as bond yields pushed back up. But DOW30 remains unabel to regain the 32780s just as NASDAQ remains supported near 12900s. How about Tuesday's action? Unlike recent risk selloffs, Tuesday's wasn't driven by higher Treasury yields. Instead, it was a classic flight to safety with 10-year yields down 7 bps and stock markets lower led by industrials and value. That points to some genuine jitters surrounding the virus. In particular, the new wave of the virus continues to harm the outlook in Europe, where H1 growth estimates continue to fall.

The Bank of Spain who lowered domestic GDP assumptions to 6% from 6.8%. Oil was particularly hard hit once again and it fell below the 50-day moving average for the first time since November. More coverage of oil and its potential repercussions on the rest of the market is explored in in the above Premium video. 

How much of the trade is genuinely fundamental and how much is repositioning or technically-driven is debatable. The moves since the US election have been one-way and whether it was virus concerns or something else, a retracement was overdue and could ultimately be healthy.

But is it over? Signs on Tuesday weren't great as oil broke below last week's lows and support gave way in a few dollar crosses, including NZD/USD and GBP/USD.

More specificaly, NZD went from correcting to plunging after PM Jacinda Ardern announced a set of new measures to confront surging price increases in the property market. Probability of a RBNZ rate hike has fallen to below 15% from over 25% last week.


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