Dollar Rebounds As Markets Cashed Out

STATE OF THE MARKETS

Dollar rebounds as markets cashed out. US Dollar rebounds for the third day on Wednesday, breaking 102.50, after sell off in stocks and bonds; with some funds going into precious metals as markets cashed out towards month end. Dow (-0.54%), S&P (-0.75%) and Nasdaq (-0.72%), including Russell (-0.49%) closed in the red as yields jumped further, with the 10Y benchmark hit 2.95% before settling around 2.91% after speculation abound that the Federal Reserve may have to hike another 50 basis points in September.

In the commodities market, crude was under selling pressure after news of near capacity in Russian oil producers and the black gold settled below $113.50/bl after New York closed. Flight to safety was noted in gold as the metal is under heavy bids and closed higher around $1,846.20/oz. Elsewhere, iron ore is stalled around $133.50/tn as markets await new catalysts for the next move.

In the FX space, Loonie seized the helm of demand across all horizons as Aussie and King Dollar continued to advance further into the demand territories. Sterling lost bids and synching into offers across all horizons as sentiments turned bearish in the long term accounts with Swiss flipping into demand.

On Thursday, markets are expected to remain cautious ahead of the US employment figures while waiting for earning reports CrowdStrike (CRWD), Lululemon (LULU), Hormel Foods (HRL), Cooper (COO), Ciena (CIEN), Toro (TTC), Calavo Growers (CVGW) and SpartanNash (SPTN) as well as the latest figures in US ADP employment numbers, jobless claims, productivity and cost figures to assess the state of health of the US economy.

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OUR PICK – EUR/CHF

Re-entry with a new stop. Recent announcement by ECB President Lagarde that the European Central Bank is likely to bring its rate to Zero by September and continue raising rates after that, has lifted Euro especially against negative yielding currencies like the Swiss and Yen. We expect the trend to continue as long as the ECB narrative remains intact. Sudden change in sentiments sent the pair below 1.0220 but managed to rebound and firm above the 61.8% retracement of April low to May high, circa 1.0250. We re-entered with a final stop.

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