Elliott Wave Analysis: US Dollar Strength May Impact Stocks

Based on a thorough analysis of the charts, a notable decline can be observed in xxx/USD pairs during the previous week. This coincides with lower US treasuries and higher bond yields.

Notably, the correlation between major currencies and stocks remains elusive. A closer examination reveals the presence of strong candles with weekly closes in favor of the US dollar, indicating the possibility of a continued display of US Dollar strength.

This topic was extensively discussed in our webinar on Friday.

Furthermore, it is evident that commodity currencies exhibit weakness, while even the British pound, despite the hawkish stance of the Bank of England last week, has not been an exception. Should the US Dollar sustain its upward trajectory, it is likely that stocks may experience a more pronounced pullback.

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Taking into account the Dow Jones Industrial Average (DJIA), a discernible pattern emerges, characterized by a notable five up followed by an ongoing three down movement. Ideally, further gains are anticipated; however, a wave C down, which is currently absent, needs to materialize. In this context, it is conceivable that a rebound may occur later this week, particularly within the range of 32500-32800.

In conclusion, the recent market trends indicate a strengthening US dollar, potentially influencing the performance of stocks. The comprehensive analysis presented here underscores the need to closely monitor these developments as they unfold, as they have the potential to shape future market dynamics.

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Twitter:  @GregaHorvatFX

The author may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.