Sat, Mar 25, 2023 @ 05:28 GMT
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Mid-US update: DOW in crash mode, Dollar gets no support from treasury yields

Risk aversion is the main theme in the first half of US session as stocks are in crash mode. DOW is trading down -1.4% or -370 pts. S&P 500 is down -1.30% and NASDAQ is down -1.86%. European indices are even worse, with DAX closed down -2.21%, CAC down -2.11% and FTSE down -1.27%.

Strength in global treasury yields is being blamed as the reason for the stock market selloff. German 10 year bund yield closed up 0.0041 at 0.556, quite “confidently” above 0.5 handle. US yields are also rising so far, with 5 year yield up 0.009 at 3.066, 10 year yield up 0.012 at 3.220, 30-year yield up 0.017 at 3.387. But we have to emphasize that these three US yields are held below last week’s highs.

In the currency markets, commodity currencies are the weakest ones naturally. But it should be noted that Dollar doesn’t get any lift from US yields and is trading as the third weakest for now, next to Canadian, Australian and New Zealand Dollar. Yen and Swiss are not the strongest neither. It’s Sterling that’s the biggest winner and Euro the second. It will take some more time for us to analysis what’s really happening. But for sure, it’s not as simple as rising yield and falling stocks. We’re not satisfied with this simplistic explanation.

Anyway, USD/JPY finally made up its mind to break through 38.2% retracement of 110.37 to 114.54 at 112.94. Next target is 61.8% retracement at 111.96.

EUR/USD will most likely take out 1.1549 resistance to indicate short term bottoming at 1.1431. It’s unsure, for now, whether it will extend the corrective rise from 1.1300 through 1.1814. But at least, more upside is in favor in near term.

The bigger question for us is, whether DOW has topped out in medium term at 26951.81, earlier that we expected. It’s a beautiful short wave five impulse from 23997.21 after wave four triangle from 26616.71 to 23997.21. Unfortunately, for now DOW is still holding above 55 day EMA. Thus, we cannot make a call yet. Let’s see how it goes for the rest of the week.

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