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Impressive Dollar Rally Cools, SPX Charges Equities and Risk Trends

Impressive Dollar Rally Cools, SPX Charges Equities and Risk Trends

John Kicklighter, Chief Strategist

Talking Points:

  • The USDollar notched a sixth consecutive daily rally for the strongest move in a year, but momentum has cooled
  • SPX posts its heftiest daily rally in two months though conviction may be difficult to maintain for the risk bid
  • Tantalizing technical setups for Pound pairs should be approached with caution, NZD rally a lasting move?

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We are seeing changing tides behind key market trends. The Dollar's remarkably run through the past week stretched to a sixth straight day for the best run in a year. However, conviction was clearly beginning to flag with a much more restrained performance for the USDollar Index. The same curb on momentum was clear with key pairs like EURUSD, AUDUSD and GBPUSD. These technical boundaries will not be easy to overcome without something material to motivate the Dollar to the next stage. Meanwhile, a swell in 'risk appetite' seems to have found a strong bannerman in the S&P 500. The US equity index posted its best daily performance in two months. Yet, this particular benchmark has a distinct range and a struggle with record highs demanding conviction above. That said, other embodiments of sentiment - be they equity indexes, high-yield assets, Emerging Market ETFs, etc - have more room to run before full faith is demanded. Will sentiment trends last where Dollar has struggled? Meanwhile, sharp moves from the Yen, New Zealand Dollar and some commodities speak more to the tactical situation in the market. We look at prevailing conditions as much as the high-fliers in today's Trading Video.

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