The US dollar has continued to be very noisy this past week, as we are looking to figure out where we are going from a risk appetite perspective. The 18 MXN level continues to be a massive resistance barrier, but the candlestick for the week is a hammer. This tells me that we could very well see a lot of volatility. However, keep in mind that the interest rate swap at the end of the day will cost you if you are long. If we fall, that means risk appetite has returned.
The NASDAQ 100 has been very noisy this past week, as we have seen a lot of volatility based on interest rates rising in the United States, and of course, the headlines coming out of the war. At this point, the energy cost spikes could very well be an issue for a lot of the AI names. With this, there is a bit of an “overhang” in this market that suppresses the market. However, a meltdown doesn’t look to be in the cards at the moment. Expect choppiness more than anything else, but I think dips continue to attract buyers.
The euro has fallen hard this past week, and we are now below the crucial 1.15 level. This is an area that a lot of people have been watching closely. With this, the markets now seem to be running to the US dollar, in a bid to find safety. Furthermore, the inflation situation in the US continues to look stubborn, and traders are now starting to think the Federal Reserve will be “stuck” with higher for longer rates. The ECB now has to worry about the lack of energy that could be an issue for the continent.
The US dollar rallied for most of the week, as the markets continue to see a lot of resistance in this area. The 1.3750 level is going to be an issue, as it has been a massive barrier several times. The oil market favors the Canadian dollar in general, but this pair is going to be different, as the United States continues to increase production of oil, currently at the 14 million barrels a day level. In other words, this market will be moving mainly on these whims of risk appetite, as traders will run to the Greenback in times of fear.
The British pound has tried to rally this past week but then got hammered as risk appetite was crushed over the course of the week. GBP finds itself threatening 1.3250 with a breakdown. If it does drop through that level, we could be looking at the 1.30 level as a target. Rallies at this point could be selling opportunities as we still have plenty of reasons out there that could have traders running to the US dollar. I have no real interest in buying at this point as long as there are war headlines that could come into play.
The US dollar fell to kick off the week, but then turned around quite drastically, as traders are trying to navigate the risk destruction that continues to be a mainstay of the market. South Africa is out there on the risk spectrum, and with a concern about energy being able to be brought to the country, it makes sense that money is leaving the country. With this, we now find ourselves threatening the 17 ZAR level, which is a large, round, psychological level that a lot of traders will watch. If we break above there, the pair could race higher. We are close to a major inflection point.
The German index continues to see a lot of volatility as everything else has, but at this point in time, it is probably worth noting that the market has stayed somewhat neutral, using the 23,000-euro level as a potential floor in the market. At this point, we could see an attempt to recover, but when you zoom down to the daily chart, you see a lot of choppiness, and therefore an attempt to build a basing pattern and a turnaround in general. If we were to break below the 23,000-euro level, the bottom could fall out.
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