Home Forex Markets Interest rate hike, recession, epidemic… Risk aversion lingers, stock market under pressure, euro parity, dollar strength

Interest rate hike, recession, epidemic… Risk aversion lingers, stock market under pressure, euro parity, dollar strength

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Interest rate hike, recession, epidemic… Risk aversion lingers, stock market under pressure, euro parity, dollar strength


In the face of the resurgence of the epidemic, the global economic recession and the central bank’s interest rate hike, the financial market has become more cautious, investor sentiment is fluctuating, and under various uncertainties, a bigger black swan is spreading its wings.

In the summer of 2022, with heightened volatility in financial markets, investors should be wary of bigger changes.

Markets continue to focus on Fed rate hikes, global recession and the pandemic.

First of all, the market is betting that the Fed will continue to raise interest rates by 75 basis points at the end of July. First, Fed officials will still take inflation as a priority, and their stance is relatively strong; second, the recent US economic data is relatively stable, especially the non-farm payrolls in June were better than expected, the data Supporting the Fed to raise interest rates, this is the driving force behind the recent dollar’s continued strong rally. Investors have disputes over the Fed’s interest rate trend after September. The market view is that the Fed will find a balance between inflation and recession, and will eventually slow down the pace of interest rate hikes. In this regard, economic data still needs to be paid attention. This week the United States released the three major inflation data of CPI, PPI and retail sales, or gave further guidance.

Second, weak European data, Sweden and Finland joining NATO, and the protracted military conflict between Russia and Ukraine have sparked more recession fears. Investors are worried that Europe is facing more geopolitical and economic risks, especially under the inflation risk brought about by “de-Russian energyization”, the market is extremely bearish on the European economic prospects, and the euro is affected and hit parity level, which is also the European year in 2002. The 1.0000 level was touched for the first time since listing, and the euro’s weakness was in favor of the dollar. Changes in the exchange rate will also trigger a series of chain reactions, leaving the EU and the European Central Bank may really not have much time.

Also, the Omicron variant has renewed interest. The White House of the United States released a response document for the Omicron BA.5 variant today, arguing that the new strain has a strong immune evasion ability, and the number of infections may rise in the next few months. The epidemic will cause more damage to the global economy. Referring to the situation in 2020-2021, the market risk aversion has risen significantly, and oil prices may plummet due to the decline in demand. At that time, it will also drag down the performance of risk assets in the stock market. Therefore, US dollar cash has become the ultimate safe haven. risk tool.

These three points dominate the recent market conditions, and the US dollar dominates. Taking history as a guide, the market’s expectations for the dollar will be higher, and the trend of the dollar will become more sensitive. Once the dollar does not perform as expected by investors, the short-term upward momentum of the dollar may come to an abrupt end, and then there will be a “selling fact” trend.

In the third quarter, stand firm and freshly released, and seize the opportunity.

The U.S. dollar index continued last year’s double-dip trend, highlighting a strong bull market. The extension of W is the main trend line, once again the upward trend remains unchanged. According to Gann’s theory, a 45-degree upward trend indicates a solid and strong buying order, while the steeper and steeper dollar trend can only indicate that the buying order is getting stronger and stronger. Homologous”.

In more detail, the main support will move up to 106-105.80, above which it will maintain a strong shock or rise. If it remains stable at 108.00, it is expected to continue to test 109.00, while the key price is at the 110.00 integer mark, and the dollar will continue to refresh new highs of more than 20 years. If it falls below 105.80, you should pay attention to the possibility of reversal, and then the US dollar will start a series of correction actions. The so-called “high altitude is too cold”. There is huge space in the process of callback and decline. The key support is 103.00-102.80, and the largest trend support line is pointing to Here, a break below 102.00 could threaten the uptrend.

On the whole, before falling below the key support, buying the dollar is still the main strategy, but avoid chasing highs, and adopt the method of holding more after the correction.

(by Arthur)

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