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US Dollar Drops as the S&P Drives, Crypto Finally Begins to Pull Back

US Dollar Drops as the S&P Drives, Crypto Finally Begins to Pull Back

James Stanley, Senior Strategist

USD, S&P 500, Bitcoin Talking Points:

  • Markets are gearing up for the Jackson Hole Economic Symposium later this week.
  • The most obvious build-up has been in USD weakness and US equity strength; but even crypto markets have appeared to be bid in anticipation of a dovish bias.
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.
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The US Dollar continued to fall in Tuesday’s session, furthering the move that started last Friday just after the USD had punched up to a fresh nine-month-high. While taper fears were running high last week after the release of FOMC meeting minutes from the July rate decision, those fears have been receding this week for a few different reasons. Perhaps the most obvious is just how dovish the FOMC appears to be, generally speaking; but more pertinent as far as timelines are concerned has been the continued rise of Covid numbers being driven by the delta variant.

With an uber-dovish Fed and a very likely reason for kicking timelines on taper back, markets have been driving in a singular direction as the USD has dropped while US equities have jumped up to even higher-highs.

In the USD, a big spot of support is now coming into play after the currency cut through a couple of key supports in the early part of this week. At this point, the USD is finding buyers in the 92.80-92.90 zone on the chart. This was an area of previously-unfilled gap left from early Q2 trade, but it came back into play in early-July and the gap was eventually filled later in the month. Since then, however, this zone has remained as pertinent with multiple support/resistance inflections.

Below this area is a grouping of confluent Fibonacci levels, plotted around 92.45 that was in-play as support a couple of weeks ago.

US Dollar Four-Hour Price Chart

US Dollar Four Hour Price Chart

Chart prepared by James Stanley; USD, DXY on Tradingview

Stocks Pop Ahead of Jackson Hole

In anticipation of the monetary punch bowl staying out for at least a little while longer, stocks have continued to ride a wave of strength as the US Dollar has sold-off over the past few days. The Nasdaq 100 illustrates this fairly well: The index pushed down to a fresh three week low last Thursday morning. Prices tested support overnight but when the US session opened, support started to play out and Friday brought a big day as prices pushed up towards resistance.

But it was this week’s open when prices really tore away, breaking out to a fresh all-time-high and not looking back. The Nasdaq 100 has gained as much as 4.5% from the low last Thursday; an astounding move over any three-day-period, much less considering our current backdrop.

Equities Forecast
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Nasdaq 100 Four Hour Price Chart

Nasdaq 100 Four Hour Price Chart

Chart prepared by James Stanley; Nasdaq 100 on Tradingview

S&P Catching Resistance at Fibonacci Expansion

The S&P 500 similarly put in some serious incline from that Thursday low. The move in the S&P has been a bit slower, however, as we’re looking at a 3.2% gain from those Thursday lows versus the 4.5% looked at above.

In the S&P, there’s an element of resistance in the current zone, taken from the 161.8% Fibonacci expansion of the July pullback. That level came into play yesterday and has since helped to stall the move.

To learn more about Fibonacci projections, check out DailyFX Education

S&P 500 Four Hour Price Chart

SPX ES SPY Four Hour Price Chart

Chart prepared by James Stanley; S&P 500 on Tradingview

Crypto Pulls Back

It’s been a big month for crypto. It was in late-July when Bitcoin was testing below the 30k level. Yesterday marked just a little over a month from that support test, but Bitcoin touched the 50k level to mark a move of more than 67% over that span of time.

That 50k test at the psychological level has led into a bit of a pullback . I had looked into the matter yesterday, and the ‘s2’ level that I had looked at in that article is now in-play.

To learn more about psychological levels, check out DailyFX Education

Bitcoin (BTC/USD) Four-Hour Price Chart

Bitcoin BTCUSD BTC/USD Four Hour Price Chart

Chart prepared by James Stanley; Bitcoin on Tradingview

--- Written by James Stanley, Senior Strategist for

Contact and follow James on Twitter: @JStanleyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.