DXY | Mid-Week Market Update for Aug 25 Tokyo Open | USD Index
The US Dollar continued to fall in Tuesday's session, continuing a trend that started last Friday, soon after the USD reached a fresh nine-month high. Fears of a taper were high last week with the release of the FOMC meeting minutes from the July rate decision, but they have decreased this week for a number of reasons. The most obvious is how dovish the FOMC seems to be in general; but, the continuous rise in Covid levels produced by the delta version has been more significant in terms of timeframes. With an ultra-dovish Fed and a very likely reason for extending taper timelines, markets have moved in one direction, with the USD plunging and US equities flying to new highs. After breaking through a number of key levels in the early part of this week, the USD is now approaching a huge area of support.
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On the chart, the USD is now finding buyers around the 92.80-92.90 area. This was an unfilled gap from early Q2 trade that resurfaced in early July, and it was eventually closed later that month. This zone, on the other hand, has remained important ever since, with many support/resistance inflections. Below this area is a cluster of confluent Fibonacci levels, indicated at 92.45, that was in play as support a few weeks ago. As the US Dollar has fallen in value over the past several days, stocks have continued to rise on the assumption that the monetary punch bowl would remain open for at least a little longer.
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The Nasdaq 100 is an excellent illustration of this: The index dropped to a fresh three-week low on Thursday morning. Prices challenged support overnight, but as the US session started, support began to erode, and Friday provided a massive day as prices raced up through resistance. Prices took off at the start of this week, exploding to a new all-time high and never looking back. The Nasdaq 100 has gained as much as 4.5 percent from its low on Thursday, an amazing gain for any three-day period, much alone considering the current circumstances. The SPX has also increased significantly from its bottom on Thursday. The SPX has risen at a slower pace, with a 3.2 percent gain from Thursday lows compared to the 4.5 percent indicated above. The current zone in the S&P has some resistance coming from the July decline's 161.8 percent Fibonacci extension. That level was implemented yesterday and has helped in the stopping of the move.
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