Dollar breakout in focus – Can markets hold their bullish trend?

Frank Walbaum

Important News this week

Tue, 01st, 16:00 CET US ISM Manufacturing PMI.

Wed, 02nd, 04:00 CET NZ RBNZ Rate Decision.

Wed, 02nd, 15:45 CET CA BoC Rate Statement.

Fri, 04th, 14:30 CET US Nonfarm Payrolls.

Fri, 04th, 14:30 CET CA Unemployment Rate

Dollar breakout in focus – Can markets hold their bullish trend?

The US Dollar could continue higher, with the DXY showing a bullish technical breakout above 99.60. If the index remains above this level, further Dollar strength could follow. Markets may nevertheless stay cautious ahead of the upcoming NFP report, which could provide the next major catalyst for rates and FX.

The stronger Dollar is weighing on metals, with Gold looking particularly weak. A continued rise in the Greenback could keep pressure on precious metals. Crypto is showing a different picture, with Bitcoin edging higher and potentially preparing for a breakout.

The major indices opened slightly weaker, but the broader trend remains bullish. However, sustained Dollar strength could eventually dampen demand for US equities, particularly if higher rates or stronger economic expectations reduce expectations for monetary easing.

The EUR/CAD short setup remains fully in play, with CAD strength continuing to support the downside scenario.

Market talk

The market is caught between a bullish equity trend and a potentially stronger Dollar. The technical breakout in DXY above 99.60 is an important development and could guide markets in the short term. If the Dollar continues higher, Gold and Silver could remain under pressure, while US indices may struggle to extend their gains.
At the same time, Bitcoin is showing relative strength and could provide an interesting counter-signal. A confirmed breakout in BTC would suggest that risk appetite remains stronger than the weakness in metals and parts of the equity market might indicate.
With NFP approaching, traders may avoid committing to a major directional move. The employment data could ultimately decide whether the Dollar breakout gains traction or turns into another false move.

Tendencies in the markets

Equities correcting, USD positive, crypto positive, oil stronger, metals weaker, JPY stronger.

Author

Frank Walbaum

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