Talking Points:
• Both the US Dollar and S&P 500 have advanced over the months, and now both threaten near-term reversal
• The positive relationship is unusual for a 'safe haven' currency and 'high return' asset class
• While both could continue to rise in tandem, is it possible they both collapse together?
See the DailyFX Analysts' forecasts for the Dollar, Euro, Pound and Gold through the 4Q on our DailyFX Trading Guides page.
Many would argue that both the US Dollar and S&P 500 are overbought. While they are extended on different time frames and due to different fundamental circumstances, the technical views both clearly show the risk that each faces should they trip up critical levels. Yet, as each stands once again on its own precipice; we have to think through the fundamental and sentiment-driven scenarios should the market take a next meaningful step. Both have advanced in tandem over the months, so a simultaneous rebound is possible so long as volatility remains in check and US rate forecasts hold up. From there, the alternative scenarios are more interesting and intense - particularly whether they could both collapse at the same time. We discuss the currency - equity benchmark relationship, look at their technical positions and discuss the trading setups for different scenarios in today's Strategy Video.
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