US stocks fall out of bed on first day of year, pushing US Dollar higher: S&P 500, GBP/USD, AUD/USD

When stocks move in one direction, the DXY is currently moving in the other direction

FOREX 2

The US stock market opened the year like a bat out of hell and quickly sold off 120 handles from its all-time highs overnight at 3773.25 to current intraday lows at 3652.50.  The S&P 500 is currently holding the upward sloping trendline from back in January 2018, near todays lows.  The US Dollar Index has been trading inversely with the S&P 500 since stocks made pandemic lows on March 23rd.  The current correlation coefficient between the S&P 500 and the US Dollar Index (DXY) is -.60.  So, as the S&P 500 falls, the DXY goes bid.

Source: Tradingview.com, FOREX.com

GBP/USD

The Pound vs the US Dollar had been moving higher into the end of the year. The pair broke out of its upward sloping channel on December 30th, where it has been since September, only to run into horizontal resistance at 1.3700.  GBP/USD moved back into the channel today on the strength of the US Dollar.  The RSI had put in 3 lower highs as price put in 3 higher highs, an indication price may turn lower. 

Source: Tradingview, FOREX.com

On a 60-minute timeframe, GBP/USD has pulled back to horizontal support just above the 61.8% Fibonacci retracement level from the December 28th lows to today’s highs.  Buyers may be looking to enter the market at the lows near 1.3541 and the 61.8% level near 1.3520.  Horizontal support is at 1.3469 and 1.3429.  Intraday resistance above is at 1.3620 and the day’s highs near 1.3703.

Source: Tradingview, FOREX.com

AUD/USD

AUD/USD has been moving aggressively higher since moving November 2nd  as price held 0.7000.  On December 31st, 2020, AUD/USD formed a shooting star candlestick just above the 161.8% Fibonacci extension from the highs of September 1st to the lows of November 2nd, near 0.7677.  The RSI was also diverging with price.  Today, price moved lower, back below the 161.8% Fibonacci level.

Source: Tradingview, FOREX.com

On a 60-minute timeframe, AUD/USD formed a double to near 0.7740 and broke the neckline at 0.7681.   The target for a double to is the height of the pattern added to the breakout level, which comes in near horizontal support at 0.7622.  Watch for buyers to enter there who may wish to take advantage of the dips.  Resistance is at the double top neckline near 0.7681 and today’s highs at 0.7740.  Horizontal support below is at 0.7554, 0.7518, and 0.7461.

Source: Tradingview, FOREX.com

There are any number of reasons stocks could have sold off today, but the point to remember is that when stocks move in one direction, the DXY is currently moving in the other direction.

Learn more about forex trading opportunities.


Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.