A New Trading Week: The Weakening Dollar and Declining Stocks
10 July 2023
As we step into a new week of trading, there is a great deal of anticipation due to a particularly eventful calendar, especially on Wednesday. Last week concluded with the American dollar weakening significantly, a trend that will undoubtedly garner a lot of attention in the days to come. In addition to the weakened dollar, we also saw a decline in stocks.
Starting with stocks, we see that they are making new long-term lows. The S&P 500 is hitting new monthly lows, and so is Dow Jones. The situation on Dow Jones is particularly intriguing as we have seen a bounce off a key level of 34300 points, signaling the sell signal is on. European indices are also heading significantly lower. DAX, in particular, is of interest as it has broken the neckline of the head and shoulder pattern at 15700 points. As long as we stay below this level, the sentiment is decidedly negative.
On the Forex market, although there is a slight correction on the dollar, the sell signal remains strong, with EURUSD climbing significantly. USDJPY has managed to break the long-term uptrend line, which is a negative indicator, and USDCHF has also escaped from its sideways correction and is aiming lower. Meanwhile, we can see the continuation of JPY's strength, so the correction that began last week will likely continue into this week.
Over in commodities, gold is making attempts to defend its support level at $1,905 per ounce. As long as we stay above this level, there is still a chance for an upswing from buyers. However, the big news is happening in oil. Brent oil is currently breaking the $77.6 per barrel resistance, which could signal a buying opportunity, unless this turns out to be a false breakout like we saw in May and June, which led to a strong sell signal.
Today's calendar is rather busy for a Monday. We've already had inflation data from China, with inflation coming in lower than expected at 0%, compared to an expected rise of 0.2%. Towards the end of the European session, we are expecting a speech from Bank of England Governor Bailey.