The U.S. dollar has shown a rebound trend in recent days, but it may not be a good omen for U.S. stocks. Jonathan Krinsky, chief market technical analyst at brokerage BTIG, said the recent rally in U.S. stocks may be nearing an end now that the dollar is showing signs of rebounding from its recent four-month slide.
Krinsky said in an interview that the dollar needs to weaken for U.S. stocks to extend their recent gains. He believes that the dollar will not have much downside, and under such circumstances, it is difficult for the stock market to have much upside.
The U.S. dollar tends to have an inverse relationship with U.S. stocks. Stocks typically fall when the dollar appreciates, as a stronger greenback squeezes companies’ overseas earnings.
The dollar has rallied more than 2 percent since hitting a nine-month low in early February, as the Federal Reserve prepares to raise interest rates further to fight inflation. Rising interest rates tend to support the value of a country’s currency by attracting foreign investors looking for higher yields.
Krinsky said: “Over the past 12 to 14 months, U.S. stocks and the U.S. dollar have shown a clear negative correlation. The U.S. dollar index is brewing a wave of rebound. lasting.”
However, Shelby McFaddin, a senior analyst at Motley Fool Asset Management, believes that it can only be said that there is a correlation between US stocks and the US dollar, but it cannot be said that this is a causal relationship. You can see it as a sign, but not as an indicator.
Goldman Sachs economist Jan Hatzius said earlier that even if the U.S. economy shows full resilience, further upside for U.S. stocks is limited due to high stock valuations.
