Good morning everyone, I hope you had a great weekend. As you know I’ve been away with my family for a few days, spending some time at the seaside due to the holidays in Europe, but as always I kept an eye on the markets.
We saw a nice move higher on stocks last week, supported by strong earnings, especially from big tech names like Meta, Microsoft, Amazon and Alphabet, all beating on revenue and EPS. For now, there are no clear recession signals, which is keeping sentiment positive, with US futures trading at new highs.
At the same time, the dollar turned slightly lower last week. Tensions in the Middle East around the Strait of Hormuz are still present, but oil eased a bit after OPEC announced an output increase of 188000 barrels per day for June. This move aims to stabilize energy markets and limit further inflation pressures.
Looking at the Dollar Index, the key technical point is that the recovery from the April 17 lows unfolded in three waves, followed by a sharp drop below the corrective channel support around 98.15. This suggests we could see further downside after the current A-B-C rebound, which is likely only temporary.
Being Monday, the bounce can be reversed later as you know, so we would expect resistance to show up around the 38.2% to 61.8% retracement zone, roughly in the 98.10 to 98.25 area. From there, another leg lower could follow, with a retest of the April lows near 97.31.
If this scenario plays out, then stronger currencies, especially commodity currencies, could continue to outperform once the current bounce on the dollar completes.
GH
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