Without waiting for the beginning of the new year, the dollar seems to have decided to go on the offensive, or at least to win back some of the significantly lost positions.
Already in only half of today’s trading day, the DXY dollar index rose 0.75%, completely recovering the positions lost last week. DXY futures are trading near 90.81 in early European session today, 117 points above the 32-month low of 89.64 hit last week.
The strengthening of the dollar on Monday is taking place against the backdrop of falling global stock indexes. Thus, futures for the American stock index S&P 500 are traded at the beginning of today’s European session near the level of 3630.0, 100 points below the local and record high of 3730.0 reached at the end of last week (see. Technical analysis and trading recommendations)
The sharp change in investor sentiment was facilitated by negative information about the emergence of a new more infectious strain of Covid-19 in the UK and about the increased risk of a hard Brexit. A number of European states, including France, Germany, Italy and Ireland, have already imposed a ban on air traffic with the UK, France has suspended the import of British goods by all modes of transport, and market participants expect additional quarantine restrictions in Europe.
Meanwhile, the United States has reported that congressional leaders have signed an agreement on a new fiscal stimulus program worth nearly $ 900 billion. This means that in 2021 the US economy will receive stronger support than almost all other countries in the world. Thus, some economists have already revised the forecast for the growth of the US economy for 2021 to 5% from 3.9% and to 4.1% from 2.5% in 2022. According to them, a new $ 900 billion stimulus package will support the US economy, and progress in vaccinations will ensure further recovery.
Thus, it is likely that today’s drop in US stock indices, triggered by fears of new lockdowns due to the coronavirus, may become the basis for new purchases of risky stock market assets. In other words, today, after the completion of the downward correction, there is a good opportunity to enter new long positions in the S&P 500. And, of course, we must not forget about the stops. Trading on the financial market, and especially high-yield assets, is known to be associated with high risks.
The penultimate and shortened trading week of this year has started today. As practice shows, in these days remaining before the new year, sharp, and multidirectional, movements can occur in the financial market. The most cautious investors are already leaving the market for the New Year holidays. Trading in financial markets will resume in full, probably only in the second week of the new 2021.
No important economic news is scheduled for today. The American trading session is likely to start with a fall in stock indices.
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