US Dollar May Extend Losses as Gold Prices Surge With Stock Markets

US Dollar, USD/INR, Bank of India Rate Decision, Gold Prices, Disney Stock – TALKING POINTS

• US Dollar may extend losses as capital flees haven-linked Greenback
• Asia-Pacific stocks, gold prices and crude oil could continue to rally
• US Dollar index indicates selloff may deepen. Where might it slow down?

Wall Street stocks closed on Wednesday with a pep in their step. The Dow Jones, S&P 500 and Nasdaq indices closed 1.39, 0.64 and 0.52 percent higher, respectively. The first benchmark was carried by the movies & entertainment sub-sector, were in it Disney (DIS) contributed +77.01 points. It closed over nine percent higher for the day and added approximately $21 billion to its over $230b market cap.

Optimism in equities spilled over into foreign exchange and commodity markets. The petroleum-linked Norwegian Krone likely benefited from a rise in crude oil prices and strong appetite for growth-oriented assets. NOK’s rise came at the expense of the haven-linked US Dollar that continues to be battered in an high-risk threshold environment.

The US Dollar’s weakness may have also contributed to the continuous surge in gold prices as they comfortably traded above a record high of $2,000/oz. The precious metal’s rise has come on the heels of depressed yields – thereby decreasing the cost of holding a non-interest bearing asset – and speculation that monetary and fiscal stimulus efforts may cause future inflation to swell.

Thursday’s Asia-Pacific Trading Session

The winds of strong risk appetite may blow into Asia-Pacific trade and give a tailwind to cycle-sensitive assets at the expense of the US Dollar and anti-risk Japanese Yen. APAC stocks may rise in tandem with commodities and other growth-oriented asset classes. The Reserve Bank of India will be announcing its rate decision which could influence USD/INR dynamics.

To learn more about this event, be sure to follow ASEAN specialist Daniel Dubrovsky on Twitter @ddubrovskyFX

US Dollar Forecast: Selloff to Deepen?

Since topping at an 18-year high, the US Dollar has quickly retreated and shattered an over two-year support channel along its descent. The selloff accelerated after weeks of persistent friction eroded the slope of appreciation, subsequently leading to an over-four percent drop. Selling pressure may start abating around familiar support at 1.2185.

US Dollar Currency Basket Versus Euro, Japanese Yen, British Pound, Australian Dollar – Daily Chart

USD index chart created using TradingView

--- Written by Dimitri Zabelin, Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitri Twitter