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US Dollar Charges into Key Resistance, Equities Sell-Off as Covid Risks Mount

US Dollar Charges into Key Resistance, Equities Sell-Off as Covid Risks Mount

Justin McQueen, Strategist

US Dollar Analysis and News

  • Risk-Off Markets Benefit Safe Havens
  • Will the Equity Pullback Continue into Next Week?
  • Key Resistance Caps USD Advance

Risk-Off Markets Benefit Safe Havens

A much more typical risk-off session with safe-haven currencies outperforming across the board, USTs bid and equities softer. As I alluded to earlier in the week sentiment had been increasingly fragile in recent sessions with virus cases picking up in Asia, while Chinese activity data showed signs of a slowdown. Another wall of worry stems from reports that the efficacy of vaccines fades quickly over time. Elsewhere, FOMC minutes released yesterday largely confirmed what we already know with the Fed gearing up for a taper announcement and given the plethora of Fed commentary since the meeting as well as the stellar NFP report, the minutes were largely outdated.

Daily FX Performance

Source: Refinitiv, DailyFX

Is this Equity Pullback Here to Last?

Interestingly, the sell-off across the equity space has yet again come ahead of the monthly OPEX, following a similar pattern to the past few months, which in turn raises my suspicions as to whether the pullback in equities continues after this week.

S&P 500 Chart: Daily Time Frame

Source: Refinitiv

Key Resistance Caps USD Advance

The greenback is back at multi-month highs, however, key resistance at 93.45-50 has curbed further upside for now. Although, while the current risk-off sentiment is underpinning the Dollar, the main focus will be on the Jackson Hole Symposium and whether Fed’s Powell provides a taper signal.

US Dollar Chart: 10 Minute Time Frame

Source: Refinitiv

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